(Change in Accounting Principle) Tom Kothe Company placed an asset in service on January 2, 2002. Its cost was $450,000 with an estimated service life of 6 years. Salvage value was estimated to be

$30,000. Using the double-declining-balance method of depreciation, the depreciation for 2002, 2003, and 2004 would be $150,000, $100,000, and $66,667 respectively. During 2004 the company’s management decided to change to the straight-line method of depreciation. Assume a 35% tax rate.

Instructions

(a) How much depreciation expense will be reported in the income from continuing operations of the company’s income statement for 2004? (Hint: Use the new depreciation in the current year.)

(b) What amount will be reported as the cumulative effect of the change in accounting principle for 2004?