Reference no: EM132686144

George Young Industries (GYI) acquired industrial robots at the beginning of 2018 and added them to the company's assembly process. During 2021, management became aware that the $3 million cost of the machinery was inadvertently recorded as repair expense on GYI's books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property (cost deducted over 7 years by the modified accelerated recovery system as follows):

Year / MACRS Deductions
2018/ 428,700
2019 / 734,700
2020 / 524,700
2021 / 374,700
2022 / 267,900
2023 / 267,600
2024 / 267,900
2025 / 133,800

Totals $1,000,000

The tax rate is 25% for all years involved.

Problem 1: Prepare journal entry necessary as a direct result of the error (as if discovered at the beginning of 2021) and separately the adjusting entry for 2021 depreciation. (If no entry is required for a transaction/event, write "No journal entry required" )