Amount Charged Erroneously to Repairs Expense

Amount Charged Erroneously to Repairs Expense

Kentucky Enterprises purchased a machine on January 2,2010, at a cost of $120,000. An additional $50,000 was spent for installation, but this amount was charged
erroneously to repairs expense. The machine has a useful life of five years and a salvage value of $20,000. As a result of the error,
a. Retained earnings at December 21, 2011, was understated by $30,000 and 2011 income was overstated by $6,000.
B. retained earnings at December 31,2011, was understated by $38,000 and 2011 was overstated by $6,000.
c. retained earnings at December 31, 2011, was understated by $30,000 and 2011 income was overstated by $10,000.
d. 2010 income was understated by $50,000.

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