A Client's Previous Two Years Financial Statements Understated Estimated Warranty

question 36

Multiple Choice

A client's previous two years financial statements understated estimated warranty payable by $30,000 and $50,000 respectively,immaterial amounts.This year the auditors estimate that the accrual is understated by an additional $60,000.In this year's audit $55,000 represents a material amount.Assuming that the entire understatement is to be recorded,following SEC SAB 108 the decrease in this year's income due to these understatements is:

• A)$0
• B)$60,000
• C)$110,000
• D)$140,000