Question: George Young Industries GYI acquired industrial robots at the

George Young Industries (GYI) acquired industrial robots at the beginning of 2008 and added them to the company's assembly process. During 2011, management became aware that the $1 million cost of the machinery was inadvertently recorded as repair expense on GYI's books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property (cost deducted over 7 years by the modified accelerated recovery system as follows):

The tax rate is 40% for all years involved.

1. Prepare any journal entry necessary as a direct result of the error described.
2. Briefly describe any other steps GYI would take to appropriately report the situation.
3. Prepare the adjusting entry for 2011 depreciation.

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  • CreatedJuly 11, 2013
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