Nevada Enterprises Purchased a Machine on January 2,2013,at a Cost

question 61

Multiple Choice

Nevada Enterprises purchased a machine on January 2,2013,at a cost of $140,000.An additional $70,000 was spent for installation,but this amount was charged erroneously to repairs expense.The machine has a useful life of five years and a salvage value of $40,000.As a result of the error,

• A) retained earnings at December 31,2014,was understated by $34,000 and 2014 income was overstated by $6,000.
• B) retained earnings at December 31,2014,was understated by $42,000 and 2014 income was overstated by $6,000.
• C) retained earnings at December 31,2014,was understated by $34,000 and 2014 income was overstated by $14,000.
• D) 2013 income was understated by $70,000.

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Definitions:

Creative Thinking

A thought process involving innovation, uniqueness, and the ability to generate new ideas or solutions.

Denial

A psychological defense mechanism wherein an individual refuses to accept reality or facts, thus blocking external events from awareness.

Under the Influence

A state of being significantly affected by substances such as alcohol or drugs, usually impairing judgment or physical capabilities.

Alcohol

A psychoactive substance, specifically ethanol, commonly found in beverages like beer, wine, and spirits, and known for its effects on mood, behavior, and physical health.