Ridge, Inc. follows IFRS for its external financial reporting, and Cannon Company follows GAAP for its external financial reporting. During 2018, both companies changed depreciation methods, from double-declining balance to straight-line. Compared to double-declining balance, for Ridge, Inc. the change resulted in a decrease in reported depreciation expense of $90,000, and for Cannon Company the change resulted in a reported decrease in depreciation expense of $105,000. The remaining useful lives of the assets impacted by the change in depreciation method is 10 years for both companies. How would this change impact the net income reported by Ridge, Inc. and Cannon Company for the year ended December 31, 2018?
Homework Answers
Ridge inc Cannon company
answer : increase $90,000 increase $105,000
explanation
since the net incomes of both companies will increased with the same amounts of decrease in depreciation expense . it means that decrease in depreciation results in increase in their net incomes .
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