National Hoopla Company switches from sum-of-the-years' digits depreciation to straight-line depreciation. As a result:
A) Current income tax payable increases.
B) The cumulative effect decreases current period earnings.
C) Prior periods' financial statements are restated.
D) None of these answer choices are correct.

Question

Quizplus · Accepted Answer

Switching from sum-of-the-years' digits depreciation to straight-line depreciation does not affect current income tax payable directly, does not require restating prior periods' financial statements, and does not involve recognizing a cumulative effect that decreases current period earnings. Changes in depreciation methods are applied prospectively.

National Hoopla Company Switches from Sum-Of-The-Years' Digits Depreciation to Straight-Line