14.

At the end of the current year, a company overstated prepaid insurance by $72,000 and understated supplies expense by $103,000. Its effective tax rate is 35%. As a result of this error, net income is:

Understated by $113,750.

Overstated by $20,150.

Overstated by $113,750.

Understated by $20,150.

15.

Red Corp. constructed a machine at a total cost of $90 million. Construction was completed at the end of 2012 and the machine was placed in service at the beginning of 2013. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $9 million. At the beginning of 2016, Red decided to change to the sum-of-the-years'-digits method. Ignoring income taxes, what will be Red's depreciation expense for 2016? (Do not round intermediate calculations. Round final answer to 2 decimal places.)

$8.10 million.

$5.89 million.

$14.18 million.

$7.17 million.