After completing its preliminary financial statements for 2012, Cannon Inc. found a mistake in computing its straight-line depreciation expense. After fixing the mistake, Cannon’s depreciation expense was now $10,000 higher. Cannon is a US company with a 35% federal statutory tax rate. How did the $10,000 increase in depreciation expense affect net income for 2012?
a) Net income increased by $10,000.
b) Net income decreased by $10,000.
c) Net income decreased by $6,500.
d) Net income decreased by $3,500.
