Exhibit 22-1 On January 1, 2014, the Chrissy Company purchased a machine for $450,000 with an estimate useful life of six years and a $30,000 salvage value. Straight-line depreciation was used for financial reporting purposes and MACRS depreciation for income tax reporting. Effective January 1, 2016, Chrissy switched to the double-declining-balance depreciation method for financial statement reporting but not for income tax purposes. Chrissy can justify the change.

-Refer to Exhibit 22-1. Assuming an income tax rate of 35%, the cumulative effect change reported in Chrissy's 2016 income statement would be

Question

-Refer to Exhibit 22-1. Assuming an income tax rate of 35%, the cumulative effect change reported in Chrissy's 2016 income statement would be

Quizplus · Accepted Answer

The cumulative effect of a change in accounting principle is not reported in the income statement under current accounting standards. Instead, the change is applied retrospectively, adjusting prior periods' financial statements as if the new method had always been used. Therefore, the cumulative effect reported in the 2016 income statement would be $0.

Exhibit 22-1 on January 1, 2014, the Chrissy Company Purchased