George Young Industries (GYI) acquired industrial robots at the beginning of 2015 and added them to the

Question:

George Young Industries (GYI) acquired industrial robots at the beginning of 2015 and added them to the company's assembly process. During 2018, 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:

Year............. MACRS Deductions

2015.......................... $ 142,900

2016 ............................244,900

2017 ............................174,900

2018 ............................124,900

2019 .............................89,300

2020 .............................89,200

2021 .............................89,300

2022 .............................44,600

Totals .......................$1,000,000

The tax rate is 40% for all years involved.

Required:

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 2018 depreciation.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 9781259722660

9th Edition

Authors: J. David Spiceland, James Sepe, Mark Nelson, Wayne Thomas

Question Posted: