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The accounting misconduct Kraft Heinz settled with the SEC involved improper recognition of cost savings. The SEC's order quoted in the article gives one example

The accounting misconduct Kraft Heinz settled with the SEC involved improper recognition of cost savings. The SEC's order quoted in the article gives one example of this misconduct.

Kraft Heinz signed a contract to buy from the supplier for three years, but the agreement was changed to say the $3.5 million was tied to purchases made in 2015 Without that wording change, Kraft Heinz would only have been able to book one-third of the cost savings in 2015

Compared to the correct amount Kraft Heinz should have reported, how would the following financial statement items likely have been affected by this $3.5 million misstatement?

2015 2016 2017

NET INCOME:

RETAINED EARNINGS:

Options for each: 1. Over-stated

2. Under-stated

3. Unaffected

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