Effective January 2, 2011, Kincaid Co

question 65

Multiple Choice

Effective January 2, 2011, Kincaid Co. adopted the accounting principle of expensing advertising and promotion costs as they are incurred. Previously, advertising and promotion costs applicable to future periods were recorded in prepaid expenses. Kincaid can justify the change, which was made for both financial statement and income tax reporting purposes. Kincaid's prepaid advertising and promotion costs totaled $250,000 at December 31, 2010. Assume that the income tax rate is 40 percent for 2010 and 2011. The adjustment for the effect of the change in accounting principle should result in a net charge against income in the income statement for 2011 of

• A) $0.
• B) $100,000.
• C) $150,000.
• D) $250,000.

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