On January 2, Year 3, to better reflect the variable use of its only machine, Holly, Inc.,
Question:
On January 2, Year 3, to better reflect the variable use of its only machine, Holly, Inc., elected to change its method of depreciation from the straight-line method to the units-of-production method. The original cost of the machine on January 2, Year 1, was $50,000 with no salvage value, and its estimated life was 10 years. Holly estimates that the machine’s total life is 50,000 machine hours. The machine hours usage was 8,500 during Year 2 and 3,500 during Year 1. Holly’s income tax rate is 30%, and the machine hours usage was 10,000 in Year 3. If Holly issues single-period statements only, it should report the accounting change in its Year 3 financial statements as a(n)
A. Adjustment to beginning retained earnings of $2,000.
B. Change in estimate and depreciation expense of $10,526.
C. Adjustment to beginning retained earnings of $1,400.
d. Cumulative effect of a change in accounting principle of $2,000 in its
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella