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Problem assiciated to salvage value

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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 31, 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 income 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.

Reference no: EM13137281

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