Salvage value using straight-line method

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Reference no: EM131260939

On May 1, 2014, ABC corporation purchased equipment for $60,000 by issuing a one-year, 4% note payable, with interest to be paid at maturity on May 1,2015. The company routinely depreciates its equipment over a 5 year life with salvage value using straight-line method. The Bookkeeper recorded the equipment purchase with a debit to a nominal account (Miscellaneous expense) and a credit to Note Payable. No adjusting entries were recorded in 2014 or 2015. All interest expense was recorded at maturity of the note. Determine the effect of errors on the company's 2014 and 2015 financial statements. Ignore the income tax effect. (Showing your work by recording both correct and incorrect journal entries for original and adjusting entries)

Reference no: EM131260939

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