Refer to Exhibit 22-3. If the revised estimated useful life of the truck is a total of seven years, and assuming an income tax rate of 35%, what is the amount of the prior-years effect that Katrina should report in its 2017 income statement as a result of changing the useful life of the truck?
A) $0
B) $5,600
C) $16,800
D) $58,800

Question

Quizplus · Accepted Answer

Changes in estimates, such as the useful life of an asset, are accounted for prospectively. Therefore, there is no prior-years effect reported in the income statement.