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Refer to the situation described in BE 2010. Assume the error was discovered in 2026, after the

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Refer to the situation described in BE 20–10. Assume the error was discovered in 2026, after the 2025 financial statements are issued. Ignoring income taxes, what journal entry will PKE use to correct the error?

Data from in BE 20-10

In 2024, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $350,000 cost of a machine purchased on January 1, 2021. The machine’s useful life was expected to be five years with no residual value. Straight-line depreciation is used by PKE. Ignoring income taxes, what journal entry will PKE use to correct the error?

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Assuming that PKE has been using straightline depreciation method for the machine the annual depreci...View the full answer


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Intermediate Accounting

Intermediate Accounting

ISBN: 9781264134526

11th Edition

Authors: David Spiceland

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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue

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