Error correction
Response to the following problem:
In 2016, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $350,000 cost of equipment purchased on January 1, 2013. The equipment's life was expected to be five years with no residual value. Straight-line depreciation is used by PKE.
Required:
1. Prepare the appropriate correcting entry assuming the error was discovered in 2016 before the adjusting and closing entries. (Ignore income taxes.)
2. Assume the error was discovered in 2018 after the 2017 financial statements are issued. Prepare the appropriate correcting entry.