At the End of the Current Year, a Company Overstated

question 59

Multiple Choice

At the end of the current year, a company overstated prepaid insurance by $80,000 and understated supplies expense by $100,000. Its effective tax rate is 40%. As a result of this error, net income is:

• A) Overstated by $108,000.
• B) Overstated by $12,000.
• C) Understated by $108,000.
• D) Understated by $12,000.

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Definitions:

Juvenile Hormone

An insect hormone that regulates development, reproduction, and other physiological functions, preventing the development into an adult.

Insect Growth

Insect growth encompasses the developmental stages an insect undergoes from egg to adulthood, influenced by factors like nutrition and environmental conditions.

Molting

The shedding and replacement of an outer covering such as an exoskeleton.

Islets of Langerhans

The endocrine portion of the pancreas that secretes glucagon and insulin, hormones that regulate the concentration of glucose in the blood.