Question

Due to an error in computing depreciation expense, Crote Corporation understated accumulated depreciation by $48 million as of December 31, 2021. Crore has a tax rate of 25%. Crores retained earnings as of December 31, 2021, would be: (Round million answer to 2 decimal places.) Multiple Choice

Answer 1

Answer: Overstated by $12 million.

Explanation:

Since Crote Corporation understated accumulated depreciation by $48 million as of December 31, 2021 and has a tax rate of 25%.

Crores retained earnings as of December 31, 2021, would be overstated in the amount of:

= $48 million × 25%

= $48 million × 0.25

= $12 million

Crores retained earnings as of December 31, 2021, would be overstated by $12 million.