Due to an error in computing depreciation expense, Crote Corporation understated accumulated depreciation by $60 million as of December 31, 2009. Crote has a tax rate of 40%. Crote's retained earnings as of December 31, 2009, would be:

Question

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The understatement of accumulated depreciation by $60 million means that expenses were understated, leading to an overstatement of net income. After accounting for taxes (40% of $60 million = $24 million), the net overstatement of retained earnings is $36 million.

Due to an Error in Computing Depreciation Expense, Crote Corporation