Question
Ridge, Inc. follows IFRS for its external financial reporting, and Cannon Company follows GAAP for its external financial reporting. During 2018, both companies changed depreciation
Ridge, Inc. follows IFRS for its external financial reporting, and Cannon Company follows GAAP for its external financial reporting. During 2018, both companies changed depreciation methods, from double-declining balance to straight-line. Compared to double-declining balance, for Ridge, Inc. the change resulted in a decrease in reported depreciation expense of $90,000, and for Cannon Company the change resulted in a reported decrease in depreciation expense of $105,000. The remaining useful lives of the assets impacted by the change in depreciation method is 10 years for both companies. How would this change impact the net income reported by Ridge, Inc. and Cannon Company for the year ended December 31, 2018?
Ridge, Inc.Cannon Company
Decrease $90,000
Decrease $105,000
Increase $90,000
Increase $105,000
Increase $90,000
Increase $10,500
Increase $9,000
Increase $10,500
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