iHeartMedia, Inc. in their annual report for the year ending December 31, 2018, state that the plant assets reported on its balance sheet includes the following:

Depreciation is computed using the straight-line method. 

Requirements 

1. Suppose iHeartMedia, Inc. purchases a new advertising structure for $100,000 on August 1. The residual value of the structure is $4,000 and the useful life is 10 years. How would iHeartMedia record the depreciation expense on December 31 in the first year of use? What about the second year of use? 

2. What would be the book value of the structure at the end of the first year? What would be the book value of the structure at the end of the second year? 

3. What would be the impact on iHeartMedia, Inc. financial statements if they failed to record the adjusting entry related to the structure?

Transcribed Image Text:

Plant Asset Buildings and improvements Structures Towers, transmitters, and studio equipment Furniture and other equipment Useful Life 10 to 39 years 3 to 20 years 5 to 20 years 2 to 20 years