Equipment was purchased on January 2 2017 for 25000 but no p

Equipment was purchased on January 2, 2017, for $25,000, but no portion of the cost has been charged to depreciation. The corporation wishes to use the straight-line method for these assets, which have been estimated to have a life of 10 years and no salvage value. What effect does this error have on net income in 2017? What entry is necessary to correct for this error, assuming that the books are not closed for 2017? (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select \"No entry\" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Solution

Answer:

1)

This error increase net income

2)

Description

Debit $

Credit $

Depreciation expanses

2500

Accumulated Depreciation

2500

Deprecation Expanses

=Cost - salvage value / life of the assets

=25000-0 /10 year

=25000/10 year

=$2500 depreciation each year