A Company Failed to Record Unrealized Gains of $20 Million

question 83

Multiple Choice

A company failed to record unrealized gains of $20 million on its trading security investments. Its tax rate is 30%. As a result of this error, total shareholders' equity would be:

• A)Understated by $14 million.
• B)Understated by $7 million.
• C)Understated by $20 million.
• D)Unaffected.Unrealized gains on trading securities are included in earnings, so retained earnings would be increased by the after-tax amount: $20,000,000 (1 30%) = $14,000,000.

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Definitions:

Executive Functioning

A set of cognitive abilities that control and regulate other abilities and behaviors, including planning, working memory, attention, problem solving, verbal reasoning, inhibition, mental flexibility, task switching, and initiation and monitoring of actions.

Cognitive Disorder

A category of mental health disorders that primarily affect learning, memory, perception, and problem solving.

Apraxia

A neurological disorder characterized by the inability to perform learned (familiar) movements on command, despite the desire and the physical ability to perform the movements.

Executive Functioning

Cognitive processes that allow for planning, decision-making, error correction, and regulation of behavior.