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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Definitions:

Creativity Skill Sets

A collection of abilities and techniques that enable an individual to generate new ideas, solutions, or approaches.

Ethical Reasoning

The process of evaluating and choosing among alternatives in a manner consistent with ethical principles.

Programmed Decisions

Decisions that are routine and repetitive, made according to established guidelines or procedures.

Nonprogrammed Decisions

Decisions made in response to situations that are unique, are poorly defined and largely unstructured, requiring creative solutions.