In 2024, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $350,000
Question:
In 2024, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $350,000 cost of a machine purchased on January 1, 2021. The machine’s useful life was expected to be five years with no residual value. Straight-line depreciation is used by PKE. Ignoring income taxes, what journal entry will PKE use to correct the error?
Step by Step Answer:
During the threeyear period depreciation expense was understated by 210000 but other ...View the full answer
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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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