Chap020 (accounting) 76 - 82 A company failed to report the...

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81. After issuing its financial statements, a company discovered that its beginning inventory was overstated by $100,000. Its tax rate is 30%. As a result of this error, net income was: A. Understated by $70,000. B. Overstated by $70,000. C. Understated by $30,000. D. Overstated by $30,000. If beginning inventory is overstated, COGS is overstated and net income is understated: $100,000 x (1 - 30%) = $70,000 . 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
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Unformatted text preview: 82. A company failed to report the $600,000 additional liability for its underfunded pension plan. Its tax rate is 30%. As result of this error, retained earnings would be: A. Unaffected. B. Overstated by $600,000. C. Overstated by $420,000. D. Overstated by $180,000. Recording the additional liability creates an intangible asset and has no effect on net income. 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...
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