At the End of the Current Year, a Company Failed

question 19

Multiple Choice

At the end of the current year, a company failed to accrue interest of $500,000 on its investments in municipal bonds. Its tax rate is 30%. As a result of this error, net income is:

• A)Unaffected.
• B)Understated by $350,000.
• C)Understated by $500,000.
• D)Understated by $150,000.$500,000 (1 0%) = $500,000 Municipal bond interest is tax exempt.

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