On March 12, 2008, Shoreham, Inc. acquired melting equipment for $45,600. The estimated life of the equipment is 6 years, with an estimated residual value of $2,400.
Throughout the current year, Calverton Company treated sales taxes paid on purchases of plant assets as revenue expenditures. As a result, the current year’s:
a Net income is overstated.
b Revenue is overstated.
c Depreciation expense is understated.
d None of the above; payments of sales taxes should be treated as revenue expenditures.
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