Everling Company purchased equipment that cost $1,500,000 on January 1, 2012. The entire cost was recorded as an expense. The equipment had a nine-year life and a $60,000 residual value. Everling uses the straight-line method to account for depreciation expense. The error was discovered on December 10, 2014. Ignore taxes. Before the correction was made and before the books were closed and the current year depreciation is recorded on December 31, 2014, retained earnings was understated by: $320,000 $160,000 $1,180,000 $1,500,000