Ivanhoe Corp. reported net incomes for the past three years as follows: $246,000 2023 2. 2022 3. $230,000 During the 2023 year-end audit, the following items come to your attention: 2021 1. Ivanhoe bought a truck on January 1, 2020 for $103,900 cash, with an $7,900 estimated residual value and a six-year life. The company debited an expense account for the entire cost of the asset. Ivanhoe uses straight-line depreciation for all trucks. $183,000 During 2023, Ivanhoe changed from straight-line depreciation for its cement plant to double declining balance. The following calculations present depreciation on both bases: Straight-line 2023 $18,780 Double-declining-balance 24,101 2022 $18,780 31,300 2021 $18,780 37,560 The net income for 2023 was calculated using the double declining balance method. In reviewing its provision for uncollectible accounts during 2023, the corporation has determined that 1% is the appropriate amount of bad debt expense to be charged to operations. The company had used 1/2 of 1% as its rate in 2022 and 2021 when the expense had been $8,910 and $5,800, respectively. Ivanhoe recorded bad debt expense using the new rate for 2023. If they had used the old rate, they would have recorded $3,110 less bad debt expense on December 31, 2023.
Ivanhoe Corp. reported net incomes for the past three years as follows: $246,000 2023 2. 2022 3. $230,000 During the 2023 year-end audit, the following items come to your attention: 2021 1. Ivanhoe bought a truck on January 1, 2020 for $103,900 cash, with an $7,900 estimated residual value and a six-year life. The company debited an expense account for the entire cost of the asset. Ivanhoe uses straight-line depreciation for all trucks. $183,000 During 2023, Ivanhoe changed from straight-line depreciation for its cement plant to double declining balance. The following calculations present depreciation on both bases: Straight-line 2023 $18,780 Double-declining-balance 24,101 2022 $18,780 31,300 2021 $18,780 37,560 The net income for 2023 was calculated using the double declining balance method. In reviewing its provision for uncollectible accounts during 2023, the corporation has determined that 1% is the appropriate amount of bad debt expense to be charged to operations. The company had used 1/2 of 1% as its rate in 2022 and 2021 when the expense had been $8,910 and $5,800, respectively. Ivanhoe recorded bad debt expense using the new rate for 2023. If they had used the old rate, they would have recorded $3,110 less bad debt expense on December 31, 2023.
Chapter6: Business Expenses
Section: Chapter Questions
Problem 43P
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Question
Transcribed Image Text:(a)
Prepare the general journal entry required to correct the books for the item 1 situation (only) of this problem, assuming that the
books have not been closed for 2023. (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 O for the amounts. List all debit entries before credit
entries.)
Account Titles
Debit
|||
Credit
Transcribed Image Text:Ivanhoe Corp. reported net incomes for the past three years as follows:
$246,000 $230,000
1.
2023
2.
2022
3.
During the 2023 year-end audit, the following items come to your attention:
2021
$183,000
Ivanhoe bought a truck on January 1, 2020 for $103,900 cash, with an $7,900 estimated residual value and a six-year life. The
company debited an expense account for the entire cost of the asset. Ivanhoe uses straight-line depreciation for all trucks.
During 2023, Ivanhoe changed from straight-line depreciation for its cement plant to double declining balance. The following
calculations present depreciation on both bases:
Straight-line
2023
$18,780
Double-declining-balance 24,101
2022
2021
$18,780 $18,780
31,300
37,560
The net income for 2023 was calculated using the double declining balance method.
In reviewing its provision for uncollectible accounts during 2023, the corporation has determined that 1% is the appropriate
amount of bad debt expense to be charged to operations. The company had used 1/2 of 1% as its rate in 2022 and 2021 when
the expense had been $8,910 and $5,800, respectively. Ivanhoe recorded bad debt expense using the new rate for 2023. If
they had used the old rate, they would have recorded $3,110 less bad debt expense on December 31, 2023.
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