Is this correct? On January 1, 2016, Crane Corporation acquired machinery at a c

Question

Is this correct?

On January 1, 2016, Crane Corporation acquired machinery at a cost of $1480000. Crane adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of 10 years, with no residual value. At the beginning of 2019, a decision was made to change to the double-declining balance method of depreciation for this machine. Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning retained earnings, is $0. $194768. $165760 $278240

Explanation / Answer

Option B is correct.

No answer mentioned is not correct. Tax effect of depreciation has not been considered.

Tax on excess dep. = 278240 * 30 %

= 83472

Net effect = 278240 - 83472

= $ 194768

Note - detailed caluculation is not made. For doubt feel free to get in touch.:)

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