The Method of Depreciation Was Changed from the Double-Declining-Balance Method

question 89

Multiple Choice

The method of depreciation was changed from the double-declining-balance method to the straight-line method in fiscal 2013. A machine was purchased on January 1, 2011, at a cost of $150,000. The machine has an estimated useful life of 10 years and a residual value of $9,000. Assume that net income before tax (NIBT) was $80,000 for fiscal 2011. What is the appropriate accounting for fiscal 2011?

• A)Retrospective adjustment and revised NIBT of $110,000.
• B)Retrospective adjustment and revised NIBT of $95,900.
• C)Retrospective adjustment and revised NIBT of $65,900.
• D)No accounting is necessary in fiscal 2011.

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Definitions:

Ordinal Data

Refers to a type of data which is categorized into ordered levels but the differences between the levels are not necessarily consistent or measurable.

Interval Data

A type of data that not only categorizes variables but also quantifies the differences between these categories, where the intervals between values are interpretable.

Ratio Data

A type of quantitative data that not only offers order and equal intervals between values but also has a natural zero point, enabling ratios to be calculated.

Nominal Data

Data categorized into distinct groups without any inherent order or ranking among the categories.