A Client's Previous Two Years Financial Statements Understated Estimated Warranty

question 17

Multiple Choice

A client's previous two years financial statements understated estimated warranty payable by $30,000 and $50,000 respectively, both immaterial amounts. This year, the auditors estimate that the accrual is understated by an additional $60,000. In this year's audit, $55,000 represents a material amount. Assuming that the entire understatement is to be recorded based on SEC SAB 108, the decrease in this year's income due to these understatements is:

• A) $0.
• B) $60,000.
• C) $110,000.
• D) $140,000.

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Definitions:

Functional Play

Play that involves simple, repetitive activities typical of toddlers, which are crucial for their motor development and understanding of the world.

Formal Games

Structured activities with set rules and objectives, often involving competition or cooperation.

Dramatic Play

A type of play where children adopt roles and act out stories or scenarios, helping with emotional and social development.

Onlooker Play

A stage of play where children watch and observe others playing but do not directly engage themselves, often occurring in early childhood.