A Company Overstated Its Liability for Warranties by $200,000

question 129

Multiple Choice

A company overstated its liability for warranties by $200,000. Its tax rate is 30%. As a result of this error, income tax expense is:

• A) Unaffected.
• B) Overstated by $60,000.
• C) Understated by $60,000.
• D) Understated by $140,000.

---

Definitions:

Pulmonary Veins

Blood vessels that carry oxygenated blood from the lungs back to the left atrium of the heart.

Oxygenated Blood

Blood that has been enriched with oxygen by the lungs and is circulated by the heart to the rest of the body.

Ventricles

Cavities within the brain that produce and contain cerebrospinal fluid, or chambers in the heart that receive or pump blood.

Blood Pressure

The pressure of circulating blood on the walls of blood vessels, usually measured with a sphygmomanometer.