Due to an Error in Computing Depreciation Expense, Prewitt Corporation

question 10

Multiple Choice

Due to an error in computing depreciation expense, Prewitt Corporation overstated accumulated depreciation by $20 million as of December 31, 2013. Prewitt has a tax rate of 30%. Prewitt's retained earnings as of December 31, 2013, would be:

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

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Definitions:

Tax Revenue

The financial proceeds that are secured by governments through the imposition of taxes.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved in a market.

Lewin's Model

A psychological model of change consisting of three stages: unfreezing, changing, and refreezing.

Planned Change

a deliberate effort to improve a business or organizational process, involving specific objectives and planned activities.