Example in 2016, Chipotle Mexican Grill recognized loss on disposal of assets of $24 million. Assuming that these assets had been in use over the previous four years, including 2016, is the reported pretax income understated or overstated? By how much? Assume the tax rate 30%. Tax Rate: 30% 2013 2014 2015 2016 over or under Income statement adjustment Loss on disposal (reversal) Staled? Tax expense (reversal) Net income (reversal) Depreciation (24 million / 4 years) Tax expense at 30% Net income (adjustment) Total net income (reversal + adjustment) Balance sheet adjustment Accumulated depreciation Deferred tax liability Retained earnings