ABC Company purchased a piece of machinery in May, 2001. The company depreciates all of its assets using the double-declining balance depreciation method. However, when recording depreciation for 2001, the company accountant made a mistake and find outd depreciation on the machine using the straight-line method.
What is the effect of this error on the company's 2001 net income and on the company's total assets at December 31, 2001?
A) net income is understated and assets are overstated
B) net income is understated and assets are understated
C) net income is not effected and assets are not effected
D) net income is understated and assets are not effected
E) net income is overstated and assets are overstated