The Max Company began its operations on January 1, 2016, and used an accelerated method of depreciation for its machinery and equipment. On January 1, 2018, Max adopted the straight-line method of depreciation. The following information is available regarding depreciation expense for each method:
Accelerated
Straight-line
Year
Depreciation
Depreciation
2016
$ 175,000
$ 150,000
2017
200,000
180,000
2018
245,000
230,000
?
What is the before-tax cumulative effect on prior years' income that would be reported as of January 1, 2018, due to changing to a different depreciation method?
A. $0
B. a decrease of $45,000
C. an increase of $45,000
D. an increase of $60,000
Answer: A
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