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Bethany Duarte
on Oct 28, 2024

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The Zack Company began its operations on January 1, 2010, and used an accelerated method of depreciation for its machinery and equipment.On January 1, 2012, Zack adopted the straight-line method of depreciation.The following information is available regarding depreciation expense for each method:  Accelerated Straight-line Year  Depreciation Depreciatior2010$75,000$50,0002011100,00080,0002012145,000130,000\begin{array}{rrr}&\text { Accelerated}&\text { Straight-line}\\ \text { Year }&\text { Depreciation}&\text { Depreciatior}\\2010 & \$ 75,000 & \$ 50,000 \\2011 & 100,000 & 80,000 \\2012 & 145,000 & 130,000\end{array} Year 201020112012 Accelerated Depreciation$75,000100,000145,000 Straight-line Depreciatior$50,00080,000130,000
What is the before-tax cumulative effect on prior years' income that would be reported as of January 1, 2012, 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

Straight-Line Method

A method of allocating the cost of an asset evenly over its useful life.

  • Calculate the effects of changes in depreciation methods on financial statements and tax implications.
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Mariel PardillaOct 31, 2024
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