Use the Following Information for Questions

question 68

Multiple Choice

Use the following information for questions.
Ventura Corporation purchased machinery on January 1, 2009 for $630,000.The company used the sum-of-the-years'-digits method and no salvage value to depreciate the asset for the first two years of its estimated six-year life.In 2010, Ventura changed to the straight-line depreciation method for this asset.The following facts pertain:

-During 2011, a construction company changed from the cost-recovery method to the percentage-of-completion method for accounting purposes but not for tax purposes.Gross profit figures under both methods for the past three years appear below:

Assuming an income tax rate of 40% for all years, the affect of this accounting change on prior periods should be reported by a credit of

• A)$600,000 on the 2011 income statement.
• B)$390,000 on the 2011 income statement.
• C)$600,000 on the 2011 retained earnings statement.
• D)$390,000 on the 2011 retained earnings statement.

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Definitions:

Exceptions

Specific conditions or cases for which the general rule does not apply.

Firm Offers

In contract law, promises made by a seller to hold an offer open to a buyer for a certain period without requiring consideration.

Irrevocable Offers

Offers in a contractual context that cannot be withdrawn, revoked, or altered once made, often for a specific period of time.

Consideration

In contract law, something of value (such as goods, services, or money) exchanged between parties that is necessary for a valid contract.