Big Bend Iron Corporation operates a small iron castings shop. As a part of the audit, you have been assigned the task of testing depreciation expense on equipment in this shop. The shop manager gives you the schedule of equipment shown below. Big Bend depreciates equipment at the rate of 10 percent per year. The company records a half year's depreciation in the year of purchase and sale of equipment. Analyze the depreciation expense and prepare any necessary adjusting journal entries.

Transcribed Image Text:

EQUIPMENT-CASTINGS SHOP Asset Balance, Balance, Description 1/1/X1 Additions Retirements 12/31/X1 Milling machinery $17,000 $3,000 $20,000 Casting equipment 24,387 2,000 $4,000 22,387 Polishing equipment 12,000 12,000 Accumulated depreciation Balance, Description 1/1/X1 Depreciation Retirements Milling machinery Casting equipment $ 3,550 7,830 $1,850 234 $800 Polishing equipment 12,000 1,200 Balance, 12/31/X1 $ 5,400 7,264 13,200