P1. On 1/1/2016 ABC bought a truck for $70,000 and estimated its useful and residual value at the end of its useful be 5 years and $5,000, respectively. To record the purchase of the truck, the company debited an expense account of $70,000 and credited cash account. ABC uses straight line depreciation for its trucks. ABC found and corrected this error in 2018. The effective income tax rate of ABC is 40%.
Instruction: prepare any necessary entries for 1) error corrections and 2) depreciation in 2016.
P2. ABC purchased a machine at $500,000 on January 1, 2016. The useful life and the salvage value of the machine were estimated to be 6 years and $50,000, respectively. The machine had been depreciated in 2016 and 2017 using the sum of….