At the end of the current year, a company overstated prepaid insurance by $62,000 and understated supplies expense by $108,000. Its effective tax rate is 20%. As a result of this error, net income is:

At the end of the current year, a company overstated prepaid insurance by $62,000 and understated supplies expense by $108,000. Its effective tax rate is 20%. As a result of this error, net income is:

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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Please answer this question.
In 20X6, Dalia Corp., a calendar fiscal-year company, discovered that depreciation expense was erroneously overstated $67,000 in both 20X4 and 20X5 for financial reporting purposes. Net income in 20X6 is correct. The tax rate is 25%. The error was made only for financial reporting, affecting depreciation and deferred income tax accounts. CCA had been recorded correctly, and thus there will be no change in taxes payable. Additional Information: 20X6 20X5 Beginning retained earnings $454,000 $430,400 Earnings (includes error in 20X5) Dividends declared 85,400 95,900 62,200 72,300
Km. 205.
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