1. On January 1, 2015, Reno Inc. purchased a machine for$150,000. The machine has...

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Accounting

1. On January 1, 2015, Reno Inc. purchased a machine for$150,000. The machine has an estimated five year life, and noresidual value. Double declining balance depreciation has been usedfor financial statement reporting and CCA for income tax reporting.Effective January 1, 2018, Reno decided to change to straight-linedepreciation for this machine, and treated the change as a changein accounting policy. For calendar 2018, Reno’s pre-tax incomebefore depreciation on this asset is $125,000. Theirincome tax rate has been 30% for many years. What net income shouldReno report for calendar 2018? a 95000 b 85820 c 66500 d 45500
2. On January 2, 2015, Beaver Corp. purchased machinery for$135,000. The entire cost was incorrectly recorded as an expense.The machinery has a nine-year life and a $9,000 residual value.Beaver uses straight-line depreciation for all its plant assets.The error was not discovered until May 1, 2017, and the appropriatecorrections were made. Ignore income tax considerations. Before thecorrections were made, retained earnings was understated by a.135000 b. 121000 c. 107000 d. 93000
3. Minor Corp. purchased a machine on January 1, 2014, for$600,000. The machine is being depreciated on a straight-linebasis, using an estimated useful life of six years and no residualvalue. On January 1, 2017, Minor determined, as a result ofadditional information, that the machine had an estimated usefullife of eight years from the date of acquisition with no residualvalue. An accounting change was made in 2017 to reflect thisadditional information. What is the amount of depreciation expenseon this machine that should be reported in Minor's income statementfor calendar 2017? a.150000 b.120000 c. 75000 c. 60000
4. Fairfax Inc. began operations on January 1, 2016. Financialstatements for 2016 and 2017 contained the following errors:
i Ending Inventory Dec 31, 2016 : 33000 too high 2017 39000 toolow ii Depreciation Expense 2016 21000 too high iii InsuranceExpense 2016 15000 too low ; 2017 15000 too high iv PrepaidInsurance 2016 15000 too high
In addition, on December 31, 2017 fully depreciated equipmentwas sold for $7,200, but the sale was not recordeduntil 2018. No corrections have been made for any of the errors.Ignore income tax considerations. The total effect of the errors onFairfax's 2017 net income is a.Understated by $94200 b.Understatedby $61200 c.Overstated by 28800 d.Overstated by 49800

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1Pretax income before depreciation 125000 depreciation 30000pre tax income after depreciation 95000 tax30 28500net income after tax 66500Since the change in depreciation method is treated as a changein accounting policy the financial statements are restated withretrospective effect The depreciation expense should have been30000 per year as per straight line method 1500005 Hence inthe See Answer

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In: Accounting1. On January 1, 2015, Reno Inc. purchased a machine for$150,000. The machine has an...1. On January 1, 2015, Reno Inc. purchased a machine for$150,000. The machine has an estimated five year life, and noresidual value. Double declining balance depreciation has been usedfor financial statement reporting and CCA for income tax reporting.Effective January 1, 2018, Reno decided to change to straight-linedepreciation for this machine, and treated the change as a changein accounting policy. For calendar 2018, Reno’s pre-tax incomebefore depreciation on this asset is $125,000. Theirincome tax rate has been 30% for many years. What net income shouldReno report for calendar 2018? a 95000 b 85820 c 66500 d 455002. On January 2, 2015, Beaver Corp. purchased machinery for$135,000. The entire cost was incorrectly recorded as an expense.The machinery has a nine-year life and a $9,000 residual value.Beaver uses straight-line depreciation for all its plant assets.The error was not discovered until May 1, 2017, and the appropriatecorrections were made. Ignore income tax considerations. Before thecorrections were made, retained earnings was understated by a.135000 b. 121000 c. 107000 d. 930003. Minor Corp. purchased a machine on January 1, 2014, for$600,000. The machine is being depreciated on a straight-linebasis, using an estimated useful life of six years and no residualvalue. On January 1, 2017, Minor determined, as a result ofadditional information, that the machine had an estimated usefullife of eight years from the date of acquisition with no residualvalue. An accounting change was made in 2017 to reflect thisadditional information. What is the amount of depreciation expenseon this machine that should be reported in Minor's income statementfor calendar 2017? a.150000 b.120000 c. 75000 c. 600004. Fairfax Inc. began operations on January 1, 2016. Financialstatements for 2016 and 2017 contained the following errors:i Ending Inventory Dec 31, 2016 : 33000 too high 2017 39000 toolow ii Depreciation Expense 2016 21000 too high iii InsuranceExpense 2016 15000 too low ; 2017 15000 too high iv PrepaidInsurance 2016 15000 too highIn addition, on December 31, 2017 fully depreciated equipmentwas sold for $7,200, but the sale was not recordeduntil 2018. No corrections have been made for any of the errors.Ignore income tax considerations. The total effect of the errors onFairfax's 2017 net income is a.Understated by $94200 b.Understatedby $61200 c.Overstated by 28800 d.Overstated by 49800