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

question 12

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 $102,000 for fiscal 2012. What is the appropriate accounting for fiscal 2012?

• A)Retrospective adjustment and revised NIBT of $87,900.
• B)Retrospective adjustment and revised NIBT of $126,000.
• C)Retrospective adjustment and revised NIBT of $111,900.
• D)No accounting is necessary in fiscal 2012.

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Definitions:

Net Method

An accounting technique that reports invoice amounts and accounts payable after deducting any available discounts for early payment.

Cash Discount

A reduction in the price paid for goods or services offered to the buyer as an incentive for early payment.

Original Voucher

A document that serves as evidence for a transaction and supports entries made in the accounting records.

Original Voucher

A primary document used as a piece of evidence for a transaction that has occurred, supporting entries in an accounting system.