Reference no: EM132584801

As at December 31, 2020, Kendrick Corporation is having its financial statements audited for the first time ever. The auditor has found the following items that might have an effect on previous years.

Question 1: Prepare the necessary journal entries to record each of the changes or errors. The books for 2020 have been adjusted but not closed. Ignore income tax effects.

• Kendrick purchased equipment on January 2, 2017, for $111,800. At that time, the equipment had an estimated useful life of 10 years, with a $8,600 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company determined that the equipment had a total useful life of seven years with a $5,160 residual value.
• Kendrick purchased a machine on July 1, 2017, at a cost of $140,000. The machine has a residual value of $14,000 and a useful life of eight years. Kendrick's bookkeeper recorded straight-line depreciation during each year but failed to consider the residual value