At the time Hollywood Corporation became a subsidiary of Vine Corporation,Hollywood switched depreciation of its plant assets from the straight-line method to the sum-of-the-years'-digits method used by Vine.With respect to Hollywood,this change was a
A) change in an accounting estimate.
B) correction of an error.
C) change in the reporting entity.
D) change in accounting principle.

Question

Quizplus · Accepted Answer

When Hollywood Corporation switched depreciation methods from straight-line to sum-of-the-years'-digits upon becoming a subsidiary of Vine Corporation, it was a change in accounting principle. This is because the method of calculating depreciation is a fundamental accounting principle, and changing it affects the calculation of expenses and the overall financial statements.

At the Time Hollywood Corporation Became a Subsidiary of Vine