A company overstated its liability for warranties by $120,000. Its tax rate is 30%. As a result of this error, income tax expense is: Multiple Choice Unaffected. Overstated by $36,000. Understated by $36,000.

A company overstated its liability for warranties by $120,000. Its tax rate is 30%. As a result of this error, income tax expense is: Multiple Choice Unaffected. Overstated by $36,000. Understated by $36,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

A company overstated its liability for warranties by $120,000. Its tax rate is 30%. As a result of this error,
income tax expense is:
Multiple Choice
Unaffected.
Overstated by $36,000.
Understated by $36,000.
Understated by $84,000.

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