Jackson Corp. is a telecommunication company. The company spent $300,000 in 2017, $400,000 in 2018, and $350,000 in 2019 leasing and maintaining equipment for its cable and Internet service division. The company capitalized the spending and would amortize it over a period of 5 years. Intangible assets are usually amortized using straight-line method. In December 2019, before closing books for 2019, Jackson Corp. reviewed its accounting practice with its auditor. During the review process, the auditor pointed out that all such equipment maintenance costs should be expensed as incurred. The tax treatment is the same as in financial reporting – the company needs to expense all the leasing and maintenance cost but mistakenly capitalized and amortized them.
We will write a
specifically for you for only
805 certified writers online
Assume a tax rate of 30%, please prepare the adjusting entries the company made for correcting the error in 2019.