In $2024,$ internal auditors discovered that PKE Displays, Incorporated, had debited an expense account for the $$357,000$ cost of equipment purchased on January $1,2021.$ The equipment$$s life was expected to be five years with no residual value. Straight$-$line depreciation is used by PKE.

Required:

Determine the cumulative effect of the error on net income over the three$-$year period from $2021$ through $2023,$ and on retained earnings by the end of $2023.$

Prepare the correcting entry, assuming the error was discovered in $2024$ before the adjusting and closing entries. $($Ignore income taxes.$)$

Assume instead that the equipment was disposed of in $2025$ and the original error was discovered in $2026$ after the $2025$ financial statements were issued. Prepare the correcting entry in $2026.$In $2024,$ internal auditors discovered that PKE Displays, Incorporated, had debited an expense account for the $$357,000$ cost of

equipment purchased on January $1,2021.$ The equipment's life was expected to be five years with no residual value. Straight$-$line

depreciation is used by PKE.

References

References

Required:

Determine the cumulative effect of the error on net income over the three$-$year period from $2021$ through $2023,$ and on

retained earnings by the end of $2023.$

Prepare the correcting entry, assuming the error was discovered in $2024$ before the adjusting and closing entries. $($Ignore

income taxes.$)$

Assume instead that the equipment was disposed of in $2025$ and the original error was discovered in $2026$ after the $2025$

financial statements were issued. Prepare the correcting entry in $2026.$

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Required $1$

Determine the cumulative effect of the error on net income over the three$-$year period from $2021$ through $2023,$ and on

retained earnings by the end of $2023.$