Question

On January 2, 2021, Tobias Company began using straight-line depreciation for a certain class of assets. In the past, the company had used double-declining-balance depreciation for these assets. As of January 2, 2021, the amount of the change in accumulated depreciation is $43,500. The appropriate tax rate is 25%. The separately reported change in 2021 earnings is:

Answer 1

Answer:

$32,625

Explanation:

The computation of the separately reported change in 2021 earning is shown below:

= Change in accumulated depreciation - change in accumulated depreciation × appropriate tax rate

= $43,500 - $43,500 × 25%

= $43,500 - $10,875

= $32,625

From changing of straight line depreciation method to double-declining-balance depreciation there is an increase of $32,625 and it is separately reported