Due to an Error in Computing Depreciation Expense, Crote Corporation

question 4

Multiple Choice

Due to an error in computing depreciation expense, Crote Corporation understated accumulated depreciation by $60 million as of December 31, 2018. Crote has a tax rate of 40%. Crote's retained earnings as of December 31, 2018, would be:

• A) Overstated by $36 million.
• B) Understated by $36 million.
• C) Overstated by $24 million.
• D) Understated by $24 million.

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Definitions:

Drive Reduction

A theory in psychology suggesting that behavior is motivated by the desire to reduce internal drives, such as hunger or thirst, to return to a state of homeostasis.

Homeostatic

Pertaining to homeostasis, which is the self-regulating process by which biological systems tend to maintain stability while adjusting to conditions that are optimal for survival.

Hypothalamus

A region of the brain that plays a crucial role in many essential functions, including regulating temperature, hunger, and thirst.

Hungry

A sensation experienced when one's body signals the need for food intake.