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Prepare Bailey's journal entry to correct depreciation

In 2010, Bailey Corporation discovered that equipment purchased on January 1, 2008, for $50,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%.

Prepare Bailey's 2010 journal entry to correct the error.

Solution Preview

What we know:

1. There was too much expense taken in 2008.
2. There was too little income tax paid in 2008.
3. The equipment depreciates at 10,000/year (50,000/5).
4. The book value as of ...

Solution Summary

The solution presents the correcting journal entry together with an explanation for each amount in the journal entry.