IOP Company purchased a machine on 1/1/15 costing $500. Estimated life was 5 years; estimated salvage value was $100. In 2018, IOP discovered that the bookkeeper correctly used straight-line depreciation, but erroneously used an estimated life of 8 years in computing depreciation for the first 3 years of life. The Prior Period Adjustment to be recorded in 2018 will include what adjustment to Retained Earnings?

Select one:

a. $90 credit

b. $90 debit

c. $50 credit

d. $$50 debit

e. $112.50 credit

On 12/31/14, the Cheboygan Company paid $2,000 of prepaid insurance and expensed the entire amount. The policy covered the period 1/1/15 to 12/31/16. The error was discovered on 1/10/16; the 2015 books are closed. The correcting journal entry will include what entry to 1/1/16 Retained Earnings?

Select one:

a. $1,000 debit

b. $1,000 credit

c. $2,000 debit

d. $2,000 credit