Speedy Corporation reported net income of $385,000 for the current year. After the financial statements had been prepared, it was discovered that ending inventory had been understated by $35,000. If the tax rate is 30%, after the error has been corrected, net income, after tax, will:

Question

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The understatement of ending inventory by $35,000 means that the cost of goods sold was overstated, which in turn understated net income. Correcting this error increases net income by $35,000. After accounting for the 30% tax rate, the net income increases by $35,000 * (1 - 0.30) = $24,500.

Speedy Corporation Reported Net Income of $385,000 for the Current