The Max Company Began Its Operations on January 1, 2014

question 124

Multiple Choice

The Max Company began its operations on January 1, 2014, and used an accelerated method of depreciation for its machinery and equipment. On January 1, 2016, Max adopted the straight-line method of depreciation. The following information is available regarding depreciation expense for each method:



What is the before-tax cumulative effect on prior years' income that would be reported as of January 1, 2016, due to changing to a different depreciation method?

• A) $0
• B) a decrease of $45,000
• C) an increase of $45,000
• D) an increase of $60,000

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Definitions:

Complexes

A core pattern of emotions, memories, perceptions, and wishes in the personal unconscious organized around a common theme, such as power or status.

Conscious Control

The deliberate use of one's attention and decision-making to regulate thoughts, feelings, and actions.

Collective Unconscious

A term coined by Carl Jung, referring to the part of the unconscious mind which is derived from ancestral memory and experience and is common to all humankind.

Consciousness

The state of being aware of and able to think about oneself, one's surroundings, and one's thoughts and feelings.