Use the Following Information for Questions

Multiple Choice

Use the following information for questions.
Ventura Corporation purchased machinery on January 1, 2009 for $630,000.The company used the sum-of-the-years'-digits method and no salvage value to depreciate the asset for the first two years of its estimated six-year life.In 2010, Ventura changed to the straight-line depreciation method for this asset.The following facts pertain:

-During 2011, a construction company changed from the cost-recovery method to the percentage-of-completion method for accounting purposes but not for tax purposes.Gross profit figures under both methods for the past three years appear below:

Assuming an income tax rate of 40% for all years, the affect of this accounting change on prior periods should be reported by a credit of

A) $600,000 on the 2011 income statement.
B) $390,000 on the 2011 income statement.
C) $600,000 on the 2011 retained earnings statement.
D) $390,000 on the 2011 retained earnings statement.