In 2016, Internal auditors discovered that Fay Inc., had debited an expense account for its $980,000 cost of a machine purchased on January 1, 2013. The machines's useful life was expected to be 7 years with no residual value. Straight-line deprectiation is used by Fay. The journal entry to correct the error will include a credit to accumulated depreciation of:.
A) $420,000
B) $280,000
C) $140,000
D) $980,000

The correct answer is C

Explanation:

The amount of depreciation expense is computed using the SLM (stands for Straight Line Method) as:

Depreciation expense = Cost of machine - Residual value / Number of life years

where

Cost of machine is $980,000

Residual value is $0

Number of life years is 7 years

Putting the value above:

Depreciation expense = $980,000 - $0 / 7

= $980,000 / 7

= $140,000

The entry which is to be recorded as:

Depreciation Expense A/cDr    $140,000

     Accumulated Depreciation A/cCr    $140,000

explanation: doctrine of respondeat superior is a legal doctrine that is commonly used in tort. this principle makes an employer or principal legally responsible for the wrongful acts done by an employee or agent, if such acts occur within the scope of the employment or agency.