On January 1, year 1, Warren Co. purchased a $600,000 machine,
with a five-year useful life and no salvage value. The machine was
depreciated by an accelerated method for book and tax purposes.
The machine’s carrying amount was $240,000 on December 31,
year 2. On January 1, year 3, Warren changed to the straight-line
method for financial reporting purposes. Warren can justify the
change. Warren’s income tax rate is 30%.
In its year 3 income statement, what amount should Warren
report as the cumulative effect of this change?
a. b. c. d.