On January 1, 2014, Roy Company acquired equipment at a cost of $500,000. Roy used the double-declining-balance method to depreciate the equipment with a ten-year life and no salvage value. On January 1, 2016, Roy changed to straight-line depreciation for this equipment, and the IRS accepted this change as being eligible as a change in accounting estimate with prospective treatment. Assuming an income tax rate of 30%, the restatement of January 1, 2016 retained earnings is
A) $ 0
B) $54,800
C) $62,640
D) $82,100

Question

Quizplus · Accepted Answer

The change in depreciation method is treated as a change in accounting estimate, which is applied prospectively. Therefore, there is no restatement of retained earnings required.

On January 1, 2014, Roy Company Acquired Equipment at a Cost