Question

Total of 6 questions.

Question 9 0.71 pts USE THE FOLLOWING INFORMATION TO ANSWER THE NEXT (6) QUESTIONS: Pitchfork, Inc. is preparing its 2020 financial statements. The company's accountant calculated Income from Continuing Operations to be $1,700,000, but upon further review is not certain this number is accurate. Pitchfork has a corporate income tax rate of 30%. Additionally, the company reports only one year of financial data on the face of the financial statements. All amounts listed are pretax unless otherwise noted. After reviewing the following information, determine the appropriate adjustments, if any, to Income from Continuing Operations. Once you have determined the CORRECT Income from Continuing Operations, complete the remainder of the Income Statement for reporting EPS. 1. On January 1, 2017, Pitchfork purchased a machine for $180,000 with a salvage value of $20,000 and useful life of eight years which was depreciated using the straight-line method. During 2020, Pitchfork decided to change to double-declining-balance method. The $1,700,000 Income from Continuing Operations had already been calculated using the straight-line depreciation method Determine the correct ADJUSTMENT to Income from Continuing Operations (ICO) for Depreciation Expense in 2020 If you need to increase ICO, enter your answer as a positive number: if you need to decrease ICO, enter your answer as a negative number using () parenthesis. If you determine that Depreciation Expense for 2020 was calculated correctly and therefore does not require an adjustment to ICO, enter NE. Do not use dollar signs or commas when entering your answer Adjustment for Depreciation Expense (2020) S[Blank 11

Answer 1

Answer 2

Requirement 1:-

Book Value at the beginning of 2020 = Purchase price of the machinery - Depreciation between 2017 to 2019

Depreciation per year under straight line method = ($180,000 - $20,000)/8 years

Depreciation per year under straight line method = $20,000

Depreciation between 2017 - 2019 = $20,000 * 3 years = $60,000

Book value of the machinery at the beginning of $180,000 - $60,000 = $120,000

Under Straight line method, Depreciation expense for 2020 = $20,000

Under Double Declining balance method :-

Depreciation expense for 2020 = Book value/Remaining life of the asset * 2

Depreciation expense for 2020 = $120,000/5 * 2

Depreciation expense for 2020 = $24,000 * 2

Depreciation expense for 2020 = $48,000

Per the question, it has been mentioned that the $1,700,000 Income from continuing operations has been calculated after incorporating the straight line method of depreciation.

Additional Depreciation expense to be charged = $48,000 - $20,000

Additional Depreciation expense to be charged = $28,000

The journal entry for the additional expense:-

Depreciation A/c $28,000

To Accumulated Depreciation A/c $28,000

(To record depreciation expense)

The revised income from continuing operations is calculated as = $1,700,000 - $28,000 = $1,672,000

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