In January 2009, the company made $24,000 in expenditures. These expenditures should have been expensed immediately. Instead,

Question:

In January 2009, the company made $24,000 in expenditures. These expenditures should have been expensed immediately. Instead, the company recorded this $24,000 payment as a purchase of equipment with a useful life of 12 years and $0 expected salvage value. The company uses straight-line depreciation. The company proceeded to depreciate this “equipment.” Make the necessary correcting entry, assuming that

(1) The error was found in May 2011 after the 2010 books had been closed and

(2) The error was found in May 2012 after the 2011 books had been closed. Ignore income taxes.

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...