1) In 2020, Company A discovered that $150,000 of equipment purchased on January 1, 2017, was expensed in full.

The equipment has a 10-year life, has no residual value and should have been depreciated on a straight-line basis.

Tax depreciation was calculated correctly including the above asset but the asset was also deducted in full for tax purposes in 2017

The tax rate for all years is 40%.

What are the journal entries required in 2020 to address the above discovery?

2) Company T had the following situations regarding its machinery during the year 2020 (assume that a full years depreciation is taken in the year of acquisition):

Machine A was acquired at a cost of $942,000 in 2016. It has been depreciated on a

straight-line basis over its expected useful life of 10 years with no residual value. In 2020, management estimates that the total useful life is only eight years with no residual value (change made before the calculation of depreciation for the year).

Machine B was purchased at a cost of $500,000 in 2019 but was expensed in error in the year of acquisition for both accounting and tax purposes. The machine has a useful life of 10 years and a residual value of $50,000. Straight line method should have been used. For tax purposes it would have been depreciated at 20 % declining balance. The tax rate is 40%.