Ernst Company purchased equipment that cost $3,000,000 on January 1, 2020. The entire cost was recorded as an expense. The equipment had a nine-year life and a $120,000 residual value. Ernst uses the straight-line method to account for depreciation expense. The error was discovered on December 10, 2022. Ernst is subject to a 20% tax rate. Before the correction was made and before the books were closed on December 31, 2022, retained earnings was understated by $2,400,000. O $1,888,000. O $1,770,000. O $1,792,000.

Ernst Company purchased equipment that cost $3,000,000 on January 1, 2020. The entire cost was recorded as an expense. The equipment had a nine-year life and a $120,000 residual value. Ernst uses the straight-line method to account for depreciation expense. The error was discovered on December 10, 2022. Ernst is subject to a 20% tax rate. Before the correction was made and before the books were closed on December 31, 2022, retained earnings was understated by $2,400,000. O $1,888,000. O $1,770,000. O $1,792,000.

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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Hh1.
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