A depreciation schedule for heavy equipment of Windsor Road Construction Company was requested by your auditor soon after December 31, 2021, showing the additions, retirements, depreciation, and other data affecting the income of the company in the 4-year period 2018 to 2021, inclusive. The following data were ascertained.
| Balance of Equipment account, Jan. 1, 2018 | | |
| Equipment No. 1 purchased Jan. 1, 2015, cost | | $50,000 |
| Equipment No. 2 purchased July 1, 2015, cost | | 61,000 |
| Equipment No. 3 purchased Jan. 1, 2016, cost | | 54,000 |
| Equipment No. 4 purchased July 1, 2017, cost | | 69,000 |
| Balance, Jan. 1, 2018 | | $234,000 |
The Accumulated Depreciation-Equipment account previously adjusted to January 1, 2018, and entered in the ledger, had a balance on that date of $89,000 (depreciation on the four pieces of equipment from the respective dates of purchase, based on a 5-year life, no salvage value). No charges had been made against the account before January 1, 2015. Transactions between January 1, 2018, and December 31, 2021, which were recorded in the ledger, are as follows.
| Jan. 1, 2019 | | Equipment No. 1 was sold for $6,000 cash; entry debited Cash and credited Equipments, $6,000. |
| July 1, 2019 | | Equipment No. 2 was traded for a larger one (No. 5), the agreed purchase price of which was $78,000. Windsor Road Construction Co. paid the dealer $65,000 cash on the transaction. The entry was a debit to Equipment and a credit to Cash, $65,000. The transaction has commercial substance. |
| July 1, 2020 | | Equipment No. 3 was damaged in a wreck to such an extent that it was sold as junk for $500 cash. Windsor Road Construction Co. received $12,000 from the insurance company. The entry made by the bookkeeper was a debit to Cash, $12,500, and credits to Miscellaneous Income, $500, and Equipment, $12,000. |
| July 1, 2021 | | A new Equipment (No. 6) was acquired for $90,000 cash and was charged at that amount to the Equipment account. |
Entries for depreciation had been made at the close of each year as follows: 2018, $46,800; 2019, $42,500; 2020, $33,000; 2021, $35,300.
(a) For each of the 4 years, compute separately the increase or decrease in net income arising from the companys errors in determining or entering depreciation or in recording transactions affecting equipment, ignoring income tax considerations.
(b) Prepare one compound journal entry as of December 31, 2021, for adjustment of the Equipment account to reflect the correct balances as revealed by your schedule, assuming that the books have not been closed for 2021.
Can you please help me with providing the calculations to get through the answers. :)
(a) For each of the 4 years, compute separately the increase or decrease in net income arising from the company's errors in determining or entering depreciation or in recording transactions affecting equipment ignoring income tax considerations. (Enter credit, understated and decrease amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (451) Per Company Books Acc. Dep. Equipment dr. cr.) Equipment dr. (cr.) Retained Earni 1/1/18 Balance $ S $ 31/18 Depreciation 12/31/18 Balances 1/1/19 Sale of Equipment #1 7/1/19 Purchase Equipment #5 Trade Equipment #2 12/31/19 Depreciation 12/31/19 Balances 7/1/20 Disposal of Equipment #3 12/31/20 Depreciation 12/31/20 Balances 7/1/21 Purchase of Equipment #6 12/31/21 Depreciation 12/31/21 Balance $ S $ For each of the 4 years, compute separately the increase or decrease in net income arising from the company's errors in determining or entering depreciation or in recording transactions affecting equipment ignoring income tax considerations (Enter credit, understated and decrease amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (450) As Adjusted Acc Dep. Equipment dr. (cr.) Retained Earnings dr. (cr.) Equipment dr. (cr.) Retained Earnings dr. 1 $ OF $ $ LA $ A $ $ - a) For each of the 4 years, compute separately the increase or decrease in net income arising from the company's errors in determining or entering depreciation or in recording transactions affecting equipment, ignoring income tax considerations. (Enter credit, understated and decrease amounts using either a negative sign preceding the numbereg. 45 or parentheses eg. (451) Net As Adjusted Acc Dep. Equipment dr. (cr.) Equipment dr. (cr.) Retained Earnings dr. (cr.) Income Overstated (Understated) S $ $ $ S $ S Prepare one compound journal entry as of December 31, 2021, for adjustment of the Trucks account to reflect the correct balances as revealed by your schedule, assuming that the books have not been closed for 2021. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Credit Account Titles and Explanation e Textbook and Media List of Accounts (a) For each of the 4 years, compute separately the increase or decrease in net income arising from the company's errors in determining or entering depreciation or in recording transactions affecting equipment ignoring income tax considerations. (Enter credit, understated and decrease amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (451) Per Company Books Acc. Dep. Equipment dr. cr.) Equipment dr. (cr.) Retained Earni 1/1/18 Balance $ S $ 31/18 Depreciation 12/31/18 Balances 1/1/19 Sale of Equipment #1 7/1/19 Purchase Equipment #5 Trade Equipment #2 12/31/19 Depreciation 12/31/19 Balances 7/1/20 Disposal of Equipment #3 12/31/20 Depreciation 12/31/20 Balances 7/1/21 Purchase of Equipment #6 12/31/21 Depreciation 12/31/21 Balance $ S $ For each of the 4 years, compute separately the increase or decrease in net income arising from the company's errors in determining or entering depreciation or in recording transactions affecting equipment ignoring income tax considerations (Enter credit, understated and decrease amounts using either a negative sign preceding the number eg.-45 or parentheses eg. (450) As Adjusted Acc Dep. Equipment dr. (cr.) Retained Earnings dr. (cr.) Equipment dr. (cr.) Retained Earnings dr. 1 $ OF $ $ LA $ A $ $ - a) For each of the 4 years, compute separately the increase or decrease in net income arising from the company's errors in determining or entering depreciation or in recording transactions affecting equipment, ignoring income tax considerations. (Enter credit, understated and decrease amounts using either a negative sign preceding the numbereg. 45 or parentheses eg. (451) Net As Adjusted Acc Dep. Equipment dr. (cr.) Equipment dr. (cr.) Retained Earnings dr. (cr.) Income Overstated (Understated) S $ $ $ S $ S Prepare one compound journal entry as of December 31, 2021, for adjustment of the Trucks account to reflect the correct balances as revealed by your schedule, assuming that the books have not been closed for 2021. (If no entry is required, select "No Entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) Debit Credit Account Titles and Explanation e Textbook and Media List of Accounts
