At the end of 2008, and before any adjusting entries were made, a company discovered that a
Question:
At the end of 2008, and before any adjusting entries were made, a company discovered that a tract of land (used as a parking lot next to the newly completed office building) that had been purchased for $20,000 cash on January 1, 2005, was debited in full to the office building account on that date. The building was being depreciated over a 20-year life with no residual value (straight-line). Assume a 25 percent tax rate.
(a) Prepare the Dec 31, 2008, correcting journal entry for all of the accounts (omit income tax effect).
(b) Prepare the Dec 31, 2008, prior period adjustment journal entry reflecting the income tax effects (assume income tax for 2008 has not yet been paid).
Financial Accounting
ISBN: 978-0324645576
10th edition
Authors: W. Steve Albrecht, James D. Stice, Earl K. Stice