On January 1, 2011, Key Corporation acquired machinery at a cost of $1,200,000. Key adopted the double-declining balance method of depreciation for this equipment and had been recording depreciation over an estimated life of eight years, with no residual value. At the beginning of 2014, a decision was made to change to the straight-line mthod of depreciation for this equipment. Assuming a 30% tax rate, the effect of this accounting change should be reported by Key in its 2014....

a) income statement as a $170,625 cumulative effect of accounting change, net of tax. b) retained earnings statement as a $170,625 addition to the beginning balance, net of tax. c) retained earnings statement as a $243,750 addition to the beginning balance. d) income statement with a $101,250 for the depreciation expense before tax.

PLEASE SHOW ALL CALCULATIONS. THANK YOU.