Chap020 (accounting) 73 - life of its patent for producing...

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75. Due to an error in computing depreciation expense, Crote Corporation understated accumulated depreciation by $60 million as of December 31, 2011. Crote has a tax rate of 40%. Crote's retained earnings as of December 31, 2011, would be: A. Overstated by $36 million. B. Understated by $36 million. C. Overstated by $24 million. D. Understated by $24 million. AACSB: Analytic Bloom's: Analysis Learning Objective: 20-06 Understand and apply the four-step process of correcting and reporting errors; regardless of the type of error or the timing of its discovery. Level of Learning: Hard 76. In 2011, due to a change in marketing forecasts, Barney Corporation reduced the projected
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Unformatted text preview: life of its patent for producing round dice. The cumulative patent amortization prior to 2011 would have been $10 million higher had the new life been used. Barney's tax rate is 30%. Barney's retained earnings as of December 31, 2011, would be: A. Overstated by $7 million. B. Overstated by $3 million. C. Overstated by $10 million. D. Unaffected. This is a change in estimate. No prior period adjustment is needed. AACSB: Analytic Bloom's: Analysis Learning Objective: 20-06 Understand and apply the four-step process of correcting and reporting errors; regardless of the type of error or the timing of its discovery. Level of Learning: Medium...
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