A Company Has Been Using Straight-Line Depreciation Over the Last

question 137

Multiple Choice

A company has been using straight-line depreciation over the last several years,which has amounted to a total of $20,000 depreciation before tax for those past years.This year,it decided to change to units of production,which would have caused $30,000 of depreciation to be recognized in those past years,before tax.The tax rate has always been 40%.This year's depreciation under both methods is: The cumulative effect account resulting from this change will decrease net income by:

• A) $6,600.
• B) $10,000.
• C) $4,000.
• D) $6,000.

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Definitions:

Bank Checking Account

A bank account that allows individuals and businesses to deposit money and withdraw funds, which can be accessed using checks, automated teller machines (ATMs), and electronic debits.

Cash Equivalents

Highly liquid investments that are usually reported with cash on the balance sheet.

Petty Cash Receipts

Petty Cash Receipts are documents that record small cash payments made from a petty cash fund, used for minor or incidental expenses.

Petty Cash Account

A small amount of cash on hand used for paying expenses too small to merit writing a check.