Question - George Young Industries (GYI) acquired industrial robots at the beginning of 2010 and added them to the company's assembly process. During 2013, management became aware that the $1 million cost of the machinery was inadvertently recorded as repair expense on GYI's books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property (cost deducted over 7 years by the modified accelerated recovery system as follows):

Year MACRS

Deductions 

2010 $ 142,900

2011 244,900

2012 174,900

2013 124,900

2014 89,300

2015 89,200

2016 89,300

2017 44,600

Totals $ 1,000,000

The tax rate is 40% for all years involved.

Required:

1. Prepare any journal entry necessary as a direct result of the error described.

2. Prepare the adjusting entry for 2013 depreciation.