45) Effective January 1, 2007, Quayle Co. established a definedbenefit plan with no retroactive benefits. The first of the required equal annual contributions wa s paid on December 31, 2007. A 10 % discount rate was used to calcul ate service cost and a 10 % rate of return was assumed for plan assets. All information on covered employees for 2007 and 2008 is the same. How should the service cost for 2008 compare with 2007, and should the 2007 balance sheet report an accrued or a prepaid pension cost? Service Cost for 2008 Compared to 2007 | Pension Cost Reported on t he 2007 Balance Sheet A. Greater than | Accrued B. Equal to | Accrued C. Equal to | Prepaid D. Greater than | Prepaid 46) On January 1, 2005, Lynn Corporation acquired equipment at a co st of $ 600,000. Lynn adopted the doubledeclining 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 c hange to the straightline method of depreciation for this equipment. Assuming a 30 % tax r ate, the cumulative effect of this accounting change on beginning retai ned 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 de preciable asset) for $ 300,000. The machine has a fiveyear life, and no salvage value. Sum-of-the-years ‟- digits depreciation has been used for financial statement reporting and the elective straightline method for income tax reporting. Effective January 1, 2008, for fi nancial statement reporting, Baden decided to change to the straightline method for depreciation of the machine. Assume that Baden can j ustify the change. Baden ‟ s income before depreciation, before income taxes, and before the cumulative effect of the accounting change( if a