At the end of the current year, a company failed to accrue interest of $500,000 on its investments in municipal bonds. Its tax rate is 30%. As a result of this error, net income is:
A) Unaffected.
B) Understated by $350,000.
C) Understated by $500,000.
D) Understated by $150,000.$500,000 (1 0%) = $500,000 Municipal bond interest is tax exempt.
Correct Answer:
Verified
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