At December 31, Year 2, Off-Line Co. changed its method of accounting for demo costs from writing off the costs over two years to expensing the costs immediately. Off-Line made the change in recognition of an increasing number of demos placed with customers that did not result in sales. Off-Line had deferred demo costs of $500,000 at December 31, Year 1, $300 ,000 of which were to be written off in Year 2 and the remainder in Year 3. Off-Line's income tax rate is 30°/o. In its Year 3 financial statements, what amount should Off-Line report as cumulative effect of change in accounting principle?

At December 31, Year 2, Off-Line Co. changed its method of accounting for demo costs from writing off the costs over two years to expensing the costs immediately. Off-Line made the change in recognition of an increasing number of demos placed with customers that did not result in sales. Off-Line had deferred demo costs of $500,000 at December 31, Year 1, $300 ,000 of which were to be written off in Year 2 and the remainder in Year 3. Off-Line's income tax rate is 30°/o. In its Year 3 financial statements, what amount should Off-Line report as cumulative effect of change in accounting principle?

At December 31, Year 2, Off-Line Co. changed its method of accounting for demo costs from writing  off the costs over two years to expensing the costs immediately. Off-Line made the change in recognition of an increasing number of demos placed with customers that did not result in sales. Off-Line had deferred demo costs of $500,000 at December 31, Year 1, $300 ,000 of which were to be written off in Year 2 and the remainder in Year 3. Off-Line's income tax rate is 30°/o. In its Year 3 financial statements, what amount should Off-Line report as cumulative effect of change in accounting principle?



a. $0
b. $200,000
c. $350,000
d. $500,000 Explanation






Answer: A