When a Firm Decided to Change Its Method of Depreciation

question 12

Multiple Choice

When a firm decided to change its method of depreciation from the straight-line method to an accelerated method, in Year 8, it discovered that the effect of the change on total depreciation expense for all years affected was as follows. For all years prior to year 8, the depreciation was $50,000 in total. For year 8 only, the depreciation increased by $11,000. Ignoring taxes, Year 8 income is decreased by what amount, and in what classification, as a result of the accounting change? $$\begin{array} { | l | l |l | } \hline& \text { Income from continuing operations } & \text { Net income } \\\hline 1& \$ 11,000 & \$ 0 \\\hline 2& \$ 11,000 & \$ 11,000 \\\hline 3& \$ 61,000 & \$ 0 \\\hline 4 &\$ 0 & \$ 51,000 \\\hline\end{array}$$

• A) Choice 1
• B) Choice 2
• C) Choice 3
• D) Choice 4

Understand the significance of accounts receivable turnover as a measure of liquidity.

Understand the factors contributing to individual differences in intelligence.

Analyze the results and controversies of intelligence testing across different ethnic groups.

Grasp the impact of genetic and environmental factors on intelligence.

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Definitions:

AASB 114

Australian Accounting Standards Board ruling 114, which sets guidelines for segment reporting by financial entities.

AASB 8/IFRS 8

Operating Segments, a standard that requires entities to disclose information about their operating segments, products, services, and geographical areas.

Disclosure Requirements

Rules and regulations that mandate the release of all relevant financial information that could influence the decision-making process of investors, stakeholders, and the public.

Reportable Segments' Revenue

The revenue generated from different segments of a business that meets certain criteria making it significant enough to require separate disclosure in financial reports.