MCD purchased a machine for $300,000 on January 1, 2020. MCD depreciates machines of this type...
MCD purchased a machine for $300,000 on January 1, 2020. MCD depreciates machines of this type by the straight-line method over a five-year period and no salvage value. Due to an error, no depreciation was taken on this machine in 2020. MCD discovered the error in 2021. What should MCD record as depreciation expense for 2021? The tax rate is 25%. A) $120,000. B) $60,000. C) $45,000. D) $90,000.
Homework Answers
Solution:
Depreciation expense for 2021 = Cost of machine / useful life = $300,000 / 5 = $60,000
Depreciation omitted for 2020 would be recorded as prior period expense in 2021.
Hence option B is correct.
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