On January 1, 2008, equipment was purchased for $10,000. The

On January 1, 2008, equipment was purchased for $10,000. The entire purchase price was expensed immediately. The equipment has a useful life of 10 years with $0 expected salvage value. The company uses straight-line depreciation. On January 1, 2011, the equipment was sold for $5,500 cash. The incorrect expensing of the purchase price, along with the subsequent failure to recognize depreciation, was discovered in May 2011 after the books for 2010 had been closed. (1) Make the necessary correcting entry in 2011 and
(2) Describe any necessary corrections to the 2011 comparative income statement (which includes 2009 and 2010).

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...

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