A Company Mistakenly Expensed a $100,000 Machine Purchased January 1,2011

question 10

Multiple Choice

A company mistakenly expensed a $100,000 machine purchased January 1,2011.The machine has no salvage value and is expected to provide benefits for five years.The error was discovered in 2014.The company shows two years of comparative statements in its December 31 annual reports.In the company's 2013 and 2014 reports shown comparatively,what amounts would be shown as adjustments to the respective retained earnings balances? 2013 2014

• A) $60,000 $40,000
• B) $0 $40,000
• C) $60,000 $0
• D) $60,000 $20,000

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Definitions:

State Income Taxes

State income taxes are taxes imposed by individual states on the income earned by individuals and entities within their jurisdiction, varying widely among states.

Residual Claim

The right of common stockholders to claim assets remaining after debts and liabilities have been settled in a liquidation event.

Stockholders' Right

Entitlements or privileges afforded to shareholders, including the right to vote on corporate matters, receive dividends, and share in the distribution of assets upon liquidation.

Dividends

Payments made by a corporation to its shareholder members, typically from profits or reserves.