On January $2,$ Year $3,$ an entity subject to IFS purchased equipment at a cost of $$2,000,000.$

During Year $3,$ the entity received a government grant in the amount of $$500,000$ toward the purchase of the equipment. The government grant was credited to revenue. The equipment is being depreciated over $10$ years with a residual value estimate of $$200,000.$

During Year $5,$ it was discovered that the government grant should have been credited to the equipment account and not to revenue.

Assuming a tax rate of $25\%,$ what is the net impact of this error on opening retained earnings?

A

C

D

$$75,000$ CR

$$262,500$ DR

$$300,000$ DR

$$450,000$ DR