Question
Accounting Error Correction Calipso Inc. incorrectly recorded repairs and maintenance expenses as a capital asset. The costs were $30,000 and were incurred in January 2022.
Accounting Error Correction
Calipso Inc. incorrectly recorded repairs and maintenance expenses as a capital asset. The costs were $30,000 and were incurred in January 2022. It is now December 2023 and you just discovered the error.
On further investigation you learn that the incorrectly capitalized costs were depreciated over 10 years (straight line) with a residual value of 5,000. Depreciation has already been recorded for 2023. Ignore income taxes.
What journal entry did Calipso record in 2022 to incorrectly capitalize the repairs?
What journal entry did Calipso record in 2023 to incorrectly record depreciation?
What journal entry should have Calipso recorded in 2022?
Before correction, was net income overstated or understated in 2022? By how much?
Before correction, was net income overstated or understated in 2023? By how much?
What journal entry is needed as of December 2023 to correct the error? Note that the books were closed for 2022, but have not been closed for 2023.
Please provide a good explanation for this question, I don't even know where to start. Thank you for your help.
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