Railsback Company Purchased a Machine on January 1, 2014, at a Cost

question 13

Essay

Railsback Company purchased a machine on January 1, 2014, at a cost of $72,000. The machine is expected to have an estimated salvage value of $4,000 at the end of its 5-year life. The company capitalized the machine and depreciated it in 2014 using the double-declining-balance method of depreciation. The company has a policy of using the straight-line method to depreciate equipment but the company accountant neglected to follow company policy when he used the double-declining-balance method. Net income for the year ended December 31, 2014, was $45,000 before taxes as the result of depreciating the machine incorrectly.
Instructions
Using the method of depreciation that the company normally follows, prepare the correcting entry and determine the corrected net income for 2014. (Show computations.)

---

Definitions:

Price Index

A statistical measure that shows changes in the cost of acquiring a specific basket of goods and services over time.

Underground Economy

Economic activity that occurs outside of government regulation and taxation, including both illegal activities and unreported income from legal sources.

Gross Domestic Product

The collective market or monetary value of all final products and services created within a nation's territory in a specific duration.

Economic Activity

Economic activity encompasses all actions that involve the production, distribution, and consumption of goods and services in an economy.