Ernst company purchased equipment that cost $3,000,000 on january 1, 2017. the entire cost was recorded as an expense. the equipment had a nine-year life and a $120,000 residual value. ernst uses the straight-line method to account for depreciation expense. the error was discovered on december 10, 2019. ernst is subject to a 40% tax rate. before the correction was made and before the books were closed on december 31, 2019, retained earnings was understated by1. $1,328,000.2. $1,416,000.3. $1,800,000.4. $1,344,000.