Nevada Enterprises purchased a machine on January 2, 2013 . at a cost of $140,000 . An additional $70,000 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 $40,000 . As a result of the error,
a. retained earnings at December 31 . 2014, was understated by $34,000 and 2014 income was overstated by $6,000.
b. retained earnings at December 31 . 2014, was understated by $42,000 and 2014 income was overstated by $6,000.
c. retained earnings at December 31 . 2014, was understated by $34,000 and 2014 income was overstated by $14,000.
d. 2013 income was understated by $70,000.
C
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