Company ABC acquired a machine at the beginning of the year. Themachine had a 6-year useful life. He expensed the entireacquisition cost in the current year. His error has what effect oncurrent period net income (NI) and retained earnings at the end ofthe 4th year (RE4)?
a. NI is understated; RE4 is understated
b. NI is understated; RE4 is correct
c. NI is overstated; RE4 is correct
d. NI is overstated; RE4 is understated
e. None of the above
Please help to explain for my better understanding.
