Due to an Error in Computing Depreciation Expense, Prewitt Corporation

question 98

Multiple Choice

Due to an error in computing depreciation expense, Prewitt Corporation overstated accumulated depreciation by $20 million as of December 31, 2009. Prewitt has a tax rate of 30%. Prewitt's retained earnings as of December 31, 2009, would be:

• A)Overstated by $14 million.
• B)Understated by $14 million.
• C)Overstated by $6 million.
• D)Understated by $6 million.