Brockway, Inc.purchased some equipment on January 1, 2010, for $300, 000 that had a five-year useful life and no salvage value.Brockway used double-declining-balance depreciation for both financial reporting and income tax purposes.On January 1, 2012, Brockway changed to the straight-line depreciation method for this equipment and can justify the change.Brockway will continue to use double-declining balance depreciation for income tax reporting.Brockway's income tax rate is 30%.Assuming Brockway's 2012 income before depreciation and tax is $800, 000, Brockway's net income for 2012 would be

A) $534, 800
B) $570, 800
C) $764, 000
D) $800, 000

Question

Lidya Payne · Accepted Answer

Final Answer : A, Explanation :  The change from double-declining-balance to straight-line depreciation will result in a lower depreciation expense in 2012, increasing net income before taxes. However, for tax purposes, the company continues to use double-declining-balance, leading to a temporary difference and deferred tax. The calculation involves determining the depreciation expense under the new method, subtracting it from income before depreciation and tax, and then accounting for income tax.

Definitions

Learning Objectives

Learning Objectives

Related questions