Assume that early in year 1, Mariposa Company purchased equipment at a cost of $ 500,000. Management expects the equipment to remain in service for five years, with zero residual value. Mariposa Company uses the straight- line depreciation method. Through an accounting error, Mariposa Company accidentally expensed the entire cost of the equipment at the time of purchase.

Requirement

1. Prepare a schedule to show the overstatement or understatement in the following items at the end of each year over the five-year life of the equipment.

a. Equipment,

b. Net income