In 2018, the Internal Auditors of KJI Manufacturing Discovered the Following

question 169

Essay

In 2018, the internal auditors of KJI Manufacturing discovered the following material errors made in prior years:
1. Equipment was purchased on June 30, 2016, for $100,000. The purchase was incorrectly recorded as a debit to repair and maintenance expense. The equipment has a useful life of five years and no residual value.
2. On March 31, 2017, $50,000 was paid to a contractor to landscape the area around a manufacturing plant including the installation of a sprinkler system. The expenditure was debited to the Land account. The landscaping is expected to have a 20-year useful life and no residual value.
KJI uses the straight-line method of depreciation for all depreciable assets.
Required:
1. Prepare the journal entries at December 31, 2018, to correct the errors (ignore income taxes).
2. Prepare the journal entries to record 2018 depreciation for any assets recorded in requirement.

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Definitions:

Granitic Intrusion

The forced entry of magma composed mainly of quartz and feldspar into surrounding rock, cooling and solidifying to form granite.

Salt Dome

A type of geological structure formed when a thick bed of evaporite minerals (mainly salt) found at depth intrudes vertically into surrounding rock layers.

Volcanic Conduit

A pipe-like structure through which magma moves from a magma chamber to the Earth's surface.

Diamond Pipe

A steep, cylindrical- to funnel-shaped volcanic conduit that contains diamonds dispersed in an igneous rock; synonym kimberlite pipe.