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Before the 2001 books are closed, you discover that on January 2, 2001, when a new machine was purchased for $20,000, the $20,000 was debited to Machinery Maintenance Expense. The new machine, which is being depreciated under the straight-line method, has a 10-year life and no estimated salvage value. However, because of the error, no depreciation was recorded for the year. If no correction is made…
A) net income for 2001 will be understated by $18,000
B) net income for 2001 will be understated by $2,000
C) total assets on the December 31, 2001 balance sheet will be understated by $20,000
D) the trial balance will not balance
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