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.

---

Definitions:

Flash Memory

A type of non-volatile storage that can be electronically erased and reprogrammed, used in USB drives, SSDs, and other digital devices.

CPU

Central Processing Unit, the primary component of a computer responsible for interpreting and executing most of the commands from the computer's other hardware and software.

Memory Modules

Physical components that store digital information temporarily or permanently, such as RAM sticks or SSDs.

Expansion Cards

Interface devices that can be added to a computer to provide additional functions such as improved video, sound, or network capabilities.