Question

On January 1, 2012, Janik Corp. acquired a machine at a cost of $800,000. 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 2012 financial statements. The oversight was discovered during the preparation of Janik's 2013 financial statements. Depreciation expense on this machine for 2013 should be

a. $0.
b. $160,000.
c. $200,000.
d. $320,000.

Answer 1

The depreciation expense on the machine for 2013 should be $160,000.

Step-by-step explanation:

To calculate the depreciation expense on the machine for 2013, we need to determine the annual depreciation amount. The machine was acquired on January 1, 2012, and has a cost of $800,000. It is to be depreciated over a five-year period with no residual value, meaning it will be fully depreciated by the end of 2016.

To find the annual depreciation expense, we divide the cost of the machine by the number of years it will be depreciated. In this case, $800,000 divided by 5 years gives us an annual depreciation expense of $160,000.

Since no depreciation was recognized in Janik Corp.'s 2012 financial statements, the full depreciation expense of $160,000 should be recognized in the 2013 financial statements.