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Posted by: Homeworkhelp
Price Quoted by Student: $3
Posted On: 2012-06-02 01:01:52
 
Question

E 13-12 Fast Tek put an asset costing $225,000 into service on January 1, 2004.

 

E13-12 Accounting for Corporations chapter 13

Larson−Wild−Chiappetta: Fundamental Accounting Principles, 17th Edition

 

E13-12 Fast Tek put an asset costing $225,000 into service on January 1, 2004. Its predicted useful life is six years with an expected salvage value of $22,500. The company uses double-declining-balance depreciation and records $75,000 of depreciation in 2004 and $50,000 of depreciation in 2005. The scheduled depreciation expense for 2006 is $33,250. After consulting with the company’s auditors, management decides to change to straight-line depreciation in 2006 without changing either the predicted useful life or salvage value. Under this new method, the annual depreciation expense for this asset is $33,750. The cumulative effect on prior year income statements (for 2004–2005) is to decrease depreciation expense by $57,500 and increase pretax income by $57,500. This company has a 35% income tax rate.

1. How much depreciation expense is reported on the company’s income statement for this asset in 2006 and in each of the remaining years of its life?

2. What amount is reported on the company’s 2006 income statement as the after-tax cumulative effect of the change in accounting principle?


Solutions
  ANSWER KEY Exercise 13-12   1.&nbs
Price $3
Attachment 1: E 13-12 Fast Tek.doc
Solution Posted By: Homeworkhelp    Posted on: 02-06-2012