Cumulative Effect of a Change in Accounting Principle
The company started business in 2006. In 2008, the company decided to change its method of computing oil and gas exploration expense. The company has only two expenses: oil and gas exploration expense and income tax expense. The following sales and oil and gas exploration expense information are for 2006–2008:
|
|
2008 |
2007 |
2006 |
|
Sales |
$5,000 |
$3,000 |
$2,000 |
|
Oil and gas exploration expense—old method |
1,000 |
600 |
400 |
|
Oil and gas exploration expense—new method |
700 |
1,200 |
1,500 |
Prepare the 2008 comparative income statement. The income tax rate for all items is 30%.