Magic Corp A) $\text { Understated } \quad \text { Overstated} \quad \text { Understated }$

Multiple Choice

Magic Corp.purchased new equipment during the year but neglected to record depreciation.What is the effect of this omission on each of the named accounts?
$\begin{array}{ccc}\text { Accumulated } & \text { Retained } & \text { Depreciation } \\\text { Depreciation } & \text { Earnings } & \text { Expense }\end{array}$

A) $\text { Understated } \quad \text { Overstated} \quad \text { Understated }$
B) $\text { Understated } \quad \text { No effect } \quad \text { Overstated }$
C) $\text { Overstated} \quad \text { Understated } \quad \text {Understated }$
D) $\text { Overstated } \quad \text { No effect } \quad \text { Overstated }$
E) $\text { Overstated } \quad \text { Understated } \quad \text { Overstated }$