Question

When a company decides to switch from the double-declining balance method to the straight-line method, this change should be handled as a

a. change in accounting principle
b. change in accounting estimate
c. prior period adjustment
d. correction of an error

Answer 1

When a company switches from the double-declining balance method to the straight-line method. The correct answer is option a.

Step-by-step explanation:

When a company decides to switch from the double-declining balance method to the straight-line method, this change should be handled as a. change in accounting principle. The double-declining balance method is an accelerated depreciation method that results in higher depreciation expenses in the early years of an asset's life.

When a company decides to switch from the double-declining balance method to the straight-line method, this change is considered a change in accounting estimate. On the other hand, the straight-line method allocates the cost of an asset evenly over its useful life.

Switching from one method to another involves a change in the way depreciation is calculated and recorded in the financial statements, which is considered a change in accounting principle.