At the end of 2008, and before any adjusting entries were made, a company discovered that a tract of land (used as a parking lot next to the newly completed office building) that had been purchased for $20,000 cash on January 1, 2005, was debited in full to the office building account on that date. The building was being depreciated over a 20-year life with no residual value (straight-line). Assume a 25 percent tax rate.
(a) Correct all of the accounts (omit income tax effect).
(b) Record the income tax effects (assume income tax for 2008 has not yet been paid).

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The Answer of At the end of 2008, and before any adjusting entries were made, a company discovered that a tract of land (used as a parking lot next to the newly completed office building) that had been purchased for $20,000 cash on January 1, 2005, was debited in full to the office building account on that date. The building was being depreciated over a 20-year life with no residual value (straight-line). Assume a 25 percent tax rate.
(a) Correct all of the accounts (omit income tax effect).
(b) Record the income tax effects (assume income tax for 2008 has not yet been paid).

At the End of 2008, and Before Any Adjusting Entries