Answered>Order 1847
The Max Company began its operations on January 1, 2016, and used an accelerated method of depreciation for its machinery and equipment. On January 1, 2018, Max adopted the straight-line method of depreciation. The following information is available regarding depreciation expense for each method:
AcceleratedStraight-lineYearDepreciationDepreciation2016$ 175,000$ 150,0002017200,000180,0002018245,000230,000
What is the before-tax cumulative effect on prior years’ income that would be reported as of January 1, 2018, due to changing to a different depreciation method?
$0
an increase of $45,000
a decrease of $45,000
an increase of $60,000