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, and its estimated life was ten years. holly estimates that the machine’s total life is 50,000 machine hours. machine hours usage was 8,500 during year 1 and 3,500 during year 2. holly’s income tax rate is 30%. holly should report the accounting change in its year 3 financial statements as a(n)
a) cumulative effect of a change in accounting principle of $2,000 in its income statement.
b) entry for current year depreciation expense on the income statement and treated on a prospective basis.
c) cumulative effect of a change in accounting principle of $1,400 in its income statement.
d) adjustment to beginning retained earnings of $1,400.
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On january 2, year 3, to better reflect the variable use of its only machine, holly, inc. elected to...
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