Question

In 2016, due to a change in marketing forecasts, Barney Corporation reduced the projected life of its patent for producing round dice. The cumulative patent amortization prior to 2016 would have been $10 million higher had the new life been used. Barney's tax rate is 30%. Barney's retained earnings as of December 31, 2016, would be:
a. Overstated by $3 million.
b. Overstated by $10 million.
c. Unaffected.
d. Overstated by $7 million.

Answer 1

Answer:

(C) Unaffected.

Explanation:

This is a change in estimate. No prior period adjustment is needed.