On January 1 of year 1, Standard Hardware, Inc., purchased equipment at a cost of $52,000. Management
Question:
On January 1 of year 1, Standard Hardware, Inc., purchased equipment at a cost of $52,000. Management expects the equipment to remain in service for five years, with zero residual value. Standard Hardware, Inc., uses the straight-line depreciation method. Through an accounting error, Standard Hardware, Inc., accidentally expensed the entire cost of the equipment at the time of purchase.
Requirement
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, net
b. Net income
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