If Undetected, What Is the Effect of This Error on Berkshire's

question 111

Multiple Choice

If undetected, what is the effect of this error on Berkshire's 12/31/08 balance sheet?

• A)Assets understated by $600,000 and shareholders' equity understated by $600,000.
• B)Assets understated by $420,000 and shareholders' equity understated by $420,000.
• C)Assets understated by $600,000, liabilities understated by $180,000 and shareholders' equity understated by $420,000.
• D)None of these is correct.

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Definitions:

Fixed Rate

An interest rate that remains constant over the lifetime of a loan or financial instrument.

Average Tax Rates

It reflects the fraction of total income that is paid in taxes, calculated by dividing the total amount of taxes paid by the total income.

Book Value

Book value is the value of an asset according to its balance sheet account balance, taking into account the cost of the asset minus depreciation.

Net Income

The net income of a business once all costs and taxes are deducted from the total earnings.