On March 1, 2006, Clark Co. issued bonds at a discount. Clark incorrectly used the straight-line method instead of the effective interest method to amortize the discount. How were the following amounts, as of December 31, 2006, affected by the error?
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|
Bond carrying amount |
Retained earnings |
|
|
a. |
Overstated |
Overstated |
|
b. |
Understated |
Understated |
|
c. |
Overstated |
Understated |
|
d. |
Understated |
Overstated |