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 de¬

preciation 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 pre¬

dicted 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 de¬

crease depreciation expense by $57,500 and increase pretax income by $57,500. This company has a 35% income tax rate.

Check (2) After-tax cumulative effect,

$37,375 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 ef¬

fect of the change in accounting principle?