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The Timmons Company buys equipment on August 1, Year One, for a reported total amount of $60,000. It has a residual value of $10,000 and
The Timmons Company buys equipment on August 1, Year One, for a reported total amount of $60,000. It has a residual value of $10,000 and an expected useful life of five years. The straight-line method and the half-year convention are applied. The company reports net income in Year One of $70,000. However, an error was made. When this equipment was bought, a $5,000 cost was capitalized when it should have been expensed. What was the appropriate amount of net income that Timmons should have reported?
1. $65,500
2. $67,000
3. $68,000
4. $68,500
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