A Company Has Been Using Straight-Line Depreciation Over the Last

A company has been using straight-line depreciation over the last several years, which has amounted to a total of $20,000 depreciation before tax for those past years.This year, it decided to change to units of production, which would have caused $30,000 of depreciation to be recognized in those past years, before tax.The tax rate has always been 40%.This year's depreciation under both methods is: Straight-Line = $5,000
Units of Production = $6,000
The cumulative effect account resulting from this change will decrease net income by:

A) $10,000.
B) $6,000.
C) $6,600.
D) $4,000.

Correct Answer:

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