Trainer Ltd Is Trying to Decide Whether to Change from the Reducing

question 35

Multiple Choice

Trainer Ltd is trying to decide whether to change from the reducing balance method of depreciation to the straight-line method for both accounting and tax purposes.Using the reducing balance method at the rate allowable for taxation purposes,the expense would be $1 020 000.If it changed to the straight-line method,depreciation expense would be $680 000.If the straight-line method were used instead of the reducing balance method,
-what would be the effect on net book value of assets?

• A) $340 000 reduction
• B) $340 000 increase
• C) $217 600 reduction
• D) $217 600 increase

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Definitions:

Weighted-Average Method

A cost accounting method that calculates the cost of goods sold and ending inventory based on the average cost of all units available for sale.

Molding Department

A specific section in a manufacturing facility where molding processes, such as injection or compression molding, are performed to shape materials.

Process Costing

A costing method used in industries where production is continuous, assigning costs to units of output on an average basis.

Job-Order Costing

An accounting method used to track costs individually for each job, not by process or time period.