Use the following information for questions 25-26.
On January 2, 2018, Moose Corp. purchased machinery for $ 270,000. The entire cost was incorrectly recorded as an expense. The machinery has a nine-year life and a $ 18,000 residual value. Beaver uses straight-line depreciation for all its plant assets. The error was not discovered until May 1, 2020, and the appropriate corrections were made. Ignore income tax considerations.
-Moose's income statement for the year ended December 31, 2020 would show the cumulative effect of this error in the amount of:
A) $ 0.
B) $ 186,000.
C) $ 214,000.
D) $ 242,000.

Question

Quizplus · Accepted Answer

The cumulative effect of the error would not appear on the 2020 income statement because it is a prior period adjustment. The error would be corrected in the retained earnings statement, not the income statement.

Use the Following Information for Questions 25-26