E22-15

At the beginning of 2013, the company purchased a machine for $510,000) (salvage value of $51.000) that had a useful life of 6 years. The bookkeeper used straight-line depreciation, ^t failed to deduct the salvage value in computing the depreciation base for the 3 years. At the end of 2014, the company failed to accrue sales salaries of $45,000. A tax laves suit that involved the year 2013 was settled late in 2015. It was determined that the company owed an additional $85,000 in taxes related to 2013. The company did not record a liability in 2013 or 2014 because the possibility of loss was considered remote, and charged the $85,000 directly to Retained Earnings. instructions prepared the journal entries necessary in 2015 to correct the books, assuming that the books have not been closed. Disregard effects of corrections on income tax. You have been engaged to review the financial subtenants Gottschalk Corporation. In the course of your examination, you conclude that the bookkeeper