Speedy Corporation reported net income of $425,000 for the current year.After the financial statements had been prepared,it was discovered that ending inventory had been understated by $25,000.If the tax rate is 40%,after the error has been corrected,net income will:

Question

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The understatement of ending inventory by $25,000 means that the cost of goods sold was overstated, which in turn understated the net income. Correcting this error will increase the net income by the after-tax effect of the inventory adjustment: $25,000 * (1 - 0.40) = $15,000.

Speedy Corporation Reported Net Income of $425,000 for the Current