In the Current Year, Jacksonville Company Has Discovered a Material

Multiple Choice

In the current year, Jacksonville Company has discovered a material prior-period error in its calculation of income. The company had incorrectly debited an asset costing $120,000 to an expense account. The related income tax expense was $42,000. This error should be reported on the current year Statement of Retained Earnings as a(n) :

A) Increase in Retained Earnings of $162,000.
B) Increase in Retained Earnings of $120,000.
C) Decrease in Retained Earnings of $120,000.
D) Increase in Retained Earnings of $78,000.
E) Decrease in Retained Earnings of $78,000.