Payton Company Purchased a Machine on January 1, 2010, at a Cost

Essay

Payton Company purchased a machine on January 1, 2010, at a cost of $80,000. It is expected to have an estimated salvage value of $5,000 at the end of its 5-year life. The company capitalized the machine and depreciated it in 2010 using the double-declining-balance method of depreciation. The company has a policy of using the straight-line method to depreciate equipment but the company accountant neglected to follow company policy when he used the double-declining-balance method. Net income for the year ended December 31, 2010 was $55,000 as the result of depreciating the machine incorrectly.
Instructions
Using the method of depreciation which the company normally follows, prepare the correcting entry and determine the corrected net income. (Show computations.)