The Max Company began its operations on January 1, 2014, and used an accelerated method of depreciation for its machinery and equipment. On January 1, 2016, Max adopted the straight-line method of depreciation. The following information is available regarding depreciation expense for each method:

What is the before-tax cumulative effect on prior years' income that would be reported as of January 1, 2016, 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

Question

The Max Company began its operations on January 1, 2014, and used an accelerated method of depreciation for its machinery and equipment. On January 1, 2016, Max adopted the straight-line method of depreciation. The following information is available regarding depreciation expense for each method:

What is the before-tax cumulative effect on prior years' income that would be reported as of January 1, 2016, due to changing to a different depreciation method?

What is the before-tax cumulative effect on prior years' income that would be reported as of January 1, 2016, 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

Quizplus · Accepted Answer

The Answer of The Max Company began its operations on January 1, 2014, and used an accelerated method of depreciation for its machinery and equipment. On January 1, 2016, Max adopted the straight-line method of depreciation. The following information is available regarding depreciation expense for each method:

What is the before-tax cumulative effect on prior years' income that would be reported as of January 1, 2016, 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

The Max Company Began Its Operations on January 1, 2014