Meagan Co. has the following errors on its books as of December 31, 2016. The books for 2016 have not yet been closed.
a.On January 1, 2014, a truck had been purchased for $28,000. The truck had an estimated life of eight years, but it was expensed in error. Straight-line depreciation with $2,000 salvage value should have been used.
b.On January 1, 2015, the company recorded the purchase of a machine in exchange for a four-year, noninterest-bearing note in the amount of $20,000. Interest rates were then 10%, but no recognition was made of that fact. The present value of $1 at 10% for four periods is 0.683013. (Ignore depreciation.)
Required:
Prepare journal entries to correct these errors at December 31, 2016. Ignore income taxes.

Question

Meagan Co. has the following errors on its books as of December 31, 2016. The books for 2016 have not yet been closed. 
a.On January 1, 2014, a truck had been purchased for $28,000. The truck had an estimated life of eight years, but it was expensed in error. Straight-line depreciation with $2,000 salvage value should have been used.
b.On January 1, 2015, the company recorded the purchase of a machine in exchange for a four-year, noninterest-bearing note in the amount of $20,000. Interest rates were then 10%, but no recognition was made of that fact. The present value of $1 at 10% for four periods is 0.683013. (Ignore depreciation.)
Required:
Prepare journal entries to correct these errors at December 31, 2016. Ignore income taxes.

Quizplus · Accepted Answer

The Answer of Meagan Co. has the following errors on its books as of December 31, 2016. The books for 2016 have not yet been closed. 
a.On January 1, 2014, a truck had been purchased for $28,000. The truck had an estimated life of eight years, but it was expensed in error. Straight-line depreciation with $2,000 salvage value should have been used.
b.On January 1, 2015, the company recorded the purchase of a machine in exchange for a four-year, noninterest-bearing note in the amount of $20,000. Interest rates were then 10%, but no recognition was made of that fact. The present value of $1 at 10% for four periods is 0.683013. (Ignore depreciation.)
Required:
Prepare journal entries to correct these errors at December 31, 2016. Ignore income taxes.

Meagan Co Has the Following Errors on Its Books as of of December