Use the Following Information for Questions

question 3

Multiple Choice

Use the following information for questions.
Swift Company purchased a machine on January 1, 2009, for $300,000.At the date of acquisition, the machine had an estimated useful life of six years with no residual value.The machine is being depreciated on a straight-line basis.On January 1, 2012, Swift determined, as a result of additional information, that the machine had an estimated useful life of eight years from the date of acquisition with no residual value.An accounting change was made in 2012 to reflect this additional information.
-Assume that the direct effects of this change are limited to the effect on depreciation and the related tax provision, and that the income tax rate was 30% in 2009, 2010, 2011, and 2012.What should be reported in Swift's income statement for the year ended December 31, 2012, as the cumulative effect on prior years of changing the estimated useful life of the machine?

• A)$0
• B)$20,000
• C)$30,000
• D)$105,000

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Definitions:

Customer Service

Activities and services provided by a company to support and enhance the satisfaction of its customers.

Competitive Prices

Pricing strategy that involves setting prices at the same level or slightly lower than competitors to attract customers.

Cost Differentiation Strategy

A business strategy aiming to offer products or services differentiable from competitors' based on features, quality, or service rather than competing primarily on price.

Product Differentiation Strategy

A business approach aimed at distinguishing a product or service from others in the market to attract a specific customer segment.