46) On January 1, 2005, Lynn Corporation acquired equipment at a cost of $ 600,000. Lynn adopted the double-declining balance method of depreciation for this equipment and had been recording depreciation over an estimated life of eight years, with no residual value. At the beginning of 2008, a decision was made to change to the straight-line method of depreciation for this equipment. Assuming a 30 % tax rate, the cumulative effect of this accounting change on beginning retained earnings, net of tax, is
A. $ 78,750. B. $ 121,875. C. $ 0. D. $ 77,109.
47) On January 1, 2005, Baden Co., purchased a machine( its only depreciable asset) for $ 300,000. The machine has a five-year life, and no salvage value. Sum-of-the-years ‟-digits depreciation has been used for financial statement reporting and the elective straight-line method for income tax reporting. Effective January 1, 2008, for financial statement reporting, Baden decided to change to the straight-line method for depreciation of the machine. Assume that Baden can justify the change. Baden ‟ s income before depreciation, before income taxes, and before the cumulative effect of the accounting change( if any), for the year ended December 31, 2008, is $ 250,000. The income tax rate for 2008, as well as for the years 2005-2007, is 30 %. What amount should Baden report as net income for the year ended December 31, 2008?
A. $ 154,000 B. $ 60,000 C. $ 91,000 D. $ 175,000