The Collins Corporation purchased office equipment at the beginning of 2009 and capitalized a cost of $2,000,000.
This cost included the following expenditures:
The company estimated an eight-year useful life for the equipment. No residual value is anticipated. The double-declining-balance method was used to determine depreciation expense for 2009 and 2010.
In 2011, after the 2010 financial statements were issued, the company decided to switch to the straight-line depreciation method for this equipment. At that time, the company's controller discovered that the original cost of the equipment incorrectly included one year of annual maintenance charges for the equipment.
Required:
1. Ignoring income taxes, prepare the appropriate correcting entry for the equipment capitalization error discovered in 2011.
2. Ignoring income taxes, prepare any 2011 journal entry(s) related to the change in depreciation methods.