Hannam Co. decided to change from the declining balance method of depreciation to the straight line method

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Hannam Co. decided to change from the declining balance method of depreciation to the straight line method effective 1 January 20X7. The following information was provided:

Excess of Declining-Balance Depreciation over Year Net Income as Reported stralght-Line Depreciation 20X3 $(30,000) $5,000 20X4 35,000 15,000 20X5 22,500 12,500 20X6 52,500 7,000 *First year of operations.


The company has a 31 December year end. The tax rate is 20%. No dividends were declared until 20X7; $20,000 of dividends were declared and paid in December 20X7. Income for 20X7, calculated using the new accounting policy, was $105,000.


Required:

Assuming that the change in policy was implemented retrospectively, present the retained earnings reconciliation that would appear in Hannam’s 20X7 statement of changes in equity.

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Intermediate Accounting Volume 1

ISBN: 9781260306743

7th Edition

Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod Dick

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