Use the Following Information for Questions 66 and 67

question 14

Multiple Choice

Use the following information for questions 66 and 67.
Ernst Company purchased equipment that cost $2,250,000 on January 1, 2014. The entire cost was recorded as an expense. The equipment had a nine-year life and a $90,000 residual value. Ernst uses the straight-line method to account for depreciation expense. The error was discovered on December 10, 2016. Ernst is subject to a 40% tax rate.
-Before the correction was made and before the books were closed on December 31, 2016, retained earnings was understated by

• A) $996,000.
• B) $1,008,000.
• C) $1,062,000.
• D) $1,350,000.

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