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Due to an error in computing depreciation expense, Prewitt Corporation overstated accumulated depreciation by $22 million as of December 31, 2021. Prewitt has a tax rate of 25%. Prewitt's retained earnings as of December 31, 2021, would be: (Round million answer to 2 decimal places.) Multiple Choice Understated by $5.50 million. Overstated by $16.50 million. Overstated by $5.50 million. Understated by $16.50 million.

Respuesta :

Answer:

the retained earnings are Understated by $16.50 million

Explanation:

Given that

There is an overstated in the accumulated depreciation by $22 million

And, the tax rate is 25%

So the retained earnings is ,

= $22 million - (25% of $22 million)

= $22 million - $5.5 million

= $16.50 million

this amount should be understated

Hence, the retained earnings are Understated by $16.50 million

Therefore the last option is correct

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