In Preparing the Adjusting Journal Entries for Year 4, the Accountant

Multiple Choice

In preparing the adjusting journal entries for Year 4, the accountant for a large local law firm discovered that depreciation on furniture, fixtures and office equipment was understated by $40,000 for Year 3. The previous accountant had not depreciated a leasehold improvement because she believed that the improvement would revert to the office owner at the end of the lease term. The present accountant, knowing better, prepared the journal entry to make the correction. That entry, assuming a tax rate of 30%, would include which of the following:

A) cr. retained earnings $28,000.
B) cr. accumulated depreciation $28,000.
C) dr. retained earnings $28,000.
D) dr. depreciation expense $28,000.