Question

When Steely Equipment purchased a 3D printer on Jan 1, 2016 for $12,000, it was incorrectly recorded to the Prepaid Supplies account. The error was discovered on December 31, 2017, before adjusting entries were posted. Based on its intended usage, Steely expected the machine would last for four years and have no residual value. If equipment is depreciated on a straight-line basis, which of the following items would appear on the balance sheet? Select all that apply.

A :

Accumulated Depreciation, $(6,000)

B :

Supplies, $(6,000)

C :

Accumulated Depreciation, $(3,000)

D :

Unrecorded Supplies Expense, $12,000

E :

Equipment — Printer, $12,000

Answer 1

Correct Answer – (E) Equipment Printer $12000

Explanation

Accumulated depreciation would be at a value of $3000 before depreciation entry but 3000 would be a positive value instead on negative.

Two years have passed since purchase of equipment and depreciation would be charged for two years. Since depreciation entry is not yet passed Accumulated depreciation would have a balance of $3000. If Depreciation entry is passed on Dec 31 2017 then only Accumulated depreciation will have a balance of $6000.

Please make note that if Accumulated depreciation value given in Option A is positive then that will also be a correct answer along with option E.

Equipment value is stated on balance sheet at $12000 which is cost of equipment and accumulated depreciation is shown as a contra account.