Exercise $22$

On January $2,2012,$Lynch Company acquired machinery at a cost of $$800,000.$ This

machinery was being depreciated by the double$-$declining$-$balance method over an

estimated useful life of eight years, with no residual value.

At the beginning of $2014,$Lynch decided to change to the straight$-$line method of

depreciation. Ignoring income tax considerations, the cumulative effect of this accounting

change is

Depreciation $($double declining balance$)$

$2012$:$$800,000\frac{2}{8},=200,000$

$2013$:$($$$800\mathrm{.}000-$$$200,000)\frac{2}{8},=\frac{150,000}{350,000}$

Depreciation $($straight line method $)$: $2$ x $($$$800,000/8)=$$$200,000$

The cumulative effect : $(350,000-200,000)$