Question

In 2020, Johnson Corporation discovered that equipment purchased on January 1, 2018, for $41,000 was expensed at that time. The equipment should have been depreciated over 5 years, with no salvage value. The effective tax rate is 30%. Johnson uses straight-line depreciation.

Prepare Johnson’s 2020 journal entry to correct the error.

Account Titles and Explanation	Debit	Credit
Enter an account title	Enter a debit amount	Enter a credit amount
Enter an account title	Enter a debit amount	Enter a credit amount
Enter an account title	Enter a debit amount	Enter a credit amount
Enter an account title	Enter a debit amount	Enter a credit amount

Answer 1

Account	Debit	Credit
Equipment	41,000
Accumulated Depreciation (41,000*2/5)		16,400
Deferred tax liability (41,000-16,400)*30%		7380
Retained earnings		17,220