In 2025, Carla Vista Company discovered an error while preparing its 2025 financial statements. A building constructed at the beginning of 2024 costing $1290000 has not been depreciated. The estimated useful life of the building is 30 years with no salvage value. Straight-line depreciation is used. Carla Vista properly included depreciation on its return also using straight-line depreciation. Income tax payable was also reported correctly at a tax rate of 20%. Income before depreciation expense in 2025 was $390000.

The appropriate journal entry to record the prior period adjustment:

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Retained Earnings Deferred Tax Asset Accumulated Depreciation Retained Earnings Accumulated Depreciation Retained Earnings Accumulated Depreciation 34400 8600 43000 34400 43000 43000 34400 Retained Earnings Deferred Tax Asset Accumulated Depreciation Retained Earnings Accumulated Depreciation Retained Earnings Accumulated Depreciation 34400 8600 43000 34400 43000 43000 34400

Answer rating: 100% (QA)

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