Question

On January 1, 2025, Janik Corp. acquired a machine at a cost of $900,000. It is to be depreciated on the straight-line method over a five-year period with no residual value. Because of a bookkeeping error, no depreciation was recognized in Janik's 2025 financial statements. The oversight was discovered during the preparation of Janik's 2026 financial statements. Depreciation expense on this machine for 2026 should be

Answer 1

The depreciation expense for Janik Corp. in 2026 should be $180,000, calculated as the cost of the asset ($900,000) divided by its useful life (5 years), despite the previous year's bookkeeping error.

Step-by-step explanation:

The student is asking about how to calculate the depreciation expense for the year 2026 after a bookkeeping error omitted recording depreciation in the prior year. Janik Corp. acquired a machine for $900,000, which is to be depreciated over a five-year period with no residual value.

Using the straight-line method, the annual depreciation expense is calculated by dividing the cost of the machine by the useful life. Thus, the annual depreciation expense is $900,000 / 5 years = $180,000 per year. Given that no depreciation was recorded for 2025, the mistake needs to be corrected in the 2026 financial statements.

The depreciation expense recorded for 2026 should still be $180,000, which is the correct annual expense for each year of the asset's useful life.