Retained earnings and net of tax

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Reference no: EM13135279

On January 1, 2005, Lynn Corporation acquired equipment at a cost of $600,000. Lynn 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 2008, a decision was made to change to the straight-line method of depreciation for this equipment. Assuming a 30% tax rate, the cumulative effect of this accounting change on beginning retained earnings, net of tax, is

a. $121,875.

b. $85,313.

c. $78,750.

d. $77,109.

Reference no: EM13135279

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