Use the Following Information for Questions

question 42

Multiple Choice

Use the following information for questions.
Ernst Company purchased equipment that cost $750,000 on January 1, 2010.The entire cost was recorded as an expense.The equipment had a nine-year life and a $30,000 residual value.Ernst uses the straight-line method to account for depreciation expense.The error was discovered on December 10, 2012.Ernst is subject to a 40% tax rate.
-Before the correction was made and before the books were closed on December 31, 2012, retained earnings was understated by

• A)$332,000.
• B)$336,000.
• C)$354,000.
• D)$450,000.

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