In 2016,management discovered that Dual Production had debited expense for the full cost of an asset purchased on January 1,2013,at a cost of $36 million with no expected residual value.Its useful life was 5 years.Dual uses straight-line depreciation.The correcting entry,assuming the error was discovered in 2016 before preparation of the adjusting and closing entries,includes:

Question

Quizplus · Accepted Answer

The asset was purchased on January 1, 2013 and had a useful life of 5 years, which means that by the end of 2016, the asset would have been fully depreciated for a total of $21.6 million (i.e. $36 million / 5 years x 4 years). Since the expense was incorrectly recorded as the full cost of the asset, an adjusting entry is needed to recognize the accumulated depreciation up to 2016. Therefore, a credit of $21.6 million should be made to accumulated depreciation.

In 2016,management Discovered That Dual Production Had Debited Expense for the Full