Problem: American Airlines purchased a machine on January 1, 2007, for $80,000. The company bookkeeper incorrectly used a 10-year life instead of an 8-year life to depreciate the machine. The effect of this error on the 2007 financial statements would be an a. overstatement of assets offset by an understatement of retained earnings. b. understatement of assets offset by an understatement of retained earnings. c. overstatement of assets, income, and stockholders' equity. d. overstatement of assets and an understatement of liabilities. e. None of the above is correct.

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American Airlines purchased a machine on January 1, 2007, for $80,000. The company bookkeeper incorrectly used a 10-year life instead of an 8-year life to depreciate the machine. The effect of this error on the 2007 financial statements would be an

a. overstatement of assets offset by an understatement of retained earnings.

b. understatement of assets offset by an understatement of retained earnings.

c. overstatement of assets, income, and stockholders' equity.

d. overstatement of assets and an understatement of liabilities.

e. None of the above is correct.

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