Asked by
Bethany Duarte
on Oct 28, 2024Verified
The Zack Company began its operations on January 1, 2010, and used an accelerated method of depreciation for its machinery and equipment.On January 1, 2012, Zack adopted the straight-line method of depreciation.The following information is available regarding depreciation expense for each method: Accelerated Straight-line Year Depreciation Depreciatior2010$75,000$50,0002011100,00080,0002012145,000130,000\begin{array}{rrr}&\text { Accelerated}&\text { Straight-line}\\ \text { Year }&\text { Depreciation}&\text { Depreciatior}\\2010 & \$ 75,000 & \$ 50,000 \\2011 & 100,000 & 80,000 \\2012 & 145,000 & 130,000\end{array} Year 201020112012 Accelerated Depreciation$75,000100,000145,000 Straight-line Depreciatior$50,00080,000130,000
What is the before-tax cumulative effect on prior years' income that would be reported as of January 1, 2012, due to changing to a different depreciation method?
A) $0
B) a decrease of $45, 000
C) an increase of $45, 000
D) an increase of $60, 000
Straight-Line Method
A method of allocating the cost of an asset evenly over its useful life.
- Calculate the effects of changes in depreciation methods on financial statements and tax implications.
Verified Answer
MP
Learning Objectives
- Calculate the effects of changes in depreciation methods on financial statements and tax implications.
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