On January 1, 2010, Lane Company made a $12,000 expenditure on a fully depreciated machine. The expenditure increased the expected life of the new machine for two years until December 31, 2011. Lane uses straight-line depreciation with no salvage value. However, Lane erroneously expensed this capital expenditure. As a result of this error,
A) 2010 income is overstated by $3,000 and 2011 income is understated by $3,000.
B) 2010 income is understated by $6,000 and 2011 income is overstated by $6,000.
C) 2010 income is understated by $6,000 and 2011 income is overstated by $3,000.
D) 2010 income is understated by $6,000 and 2011 income is correctly stated.
Correct Answer:
Verified
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