In 2011 Roswell Company changed from straight-line to double declining-balance amortization.The total difference in amortization for all years through 2010 was $52,000 and for 2011 the difference was $5,000.The tax rate is 30 percent.The amount that should be reported in the statement of retained earnings for 2011 as a change in accounting principle is
A)$36,400 debit.
B)$36,400 credit.
C)$39,900 debit.
D)$39,900 credit.

Question

Quizplus · Accepted Answer

The change in accounting principle requires a retrospective adjustment. The total difference in amortization is $52,000, and the tax effect is $52,000 x 30% = $15,600. Therefore, the net effect on retained earnings is $52,000 - $15,600 = $36,400 debit.

In 2011 Roswell Company Changed from Straight-Line to Double Declining-Balance