Martin Company discovers an error has been made in a prior year which cause an u

Question

Martin Company discovers an error has been made in a prior year which cause an understatement of income in that year. If this is deemed to be a prior period adjustment, which of the following will be true? The error is shown on the current year income statement net of tax The error is shown as a credit to the beginning balance of retained earnings for the current year The error is shown as a debit to the beginning balance of retained earnings for the current year. The prior year statement is revised

Explanation / Answer

a) The error is shown on the current year income statement net of tax.

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