On January 1, 2010, Willis Company acquired equipment at a cost of $400, 000.Willis used the double-declining-balance method to depreciate the equipment with a ten-year life and no salvage value.On January 1, 2012, Willis changed to straight-line depreciation for this equipment, and the IRS accepted this change as being eligible as a change in accounting estimate with prospective treatment.Assuming an income tax rate of 30%, the restatement of January 1, 2012 retained earnings is
A)$ 0
B)$44, 800
C)$52, 640
D)$72, 100

Question

Quizplus · Accepted Answer

When changing from the double-declining-balance method to the straight-line method, the change is treated prospectively. This means that past financial statements are not restated. Therefore, there is no impact on retained earnings as of January 1, 2012, due to this change.

On January 1, 2010, Willis Company Acquired Equipment at a Cost