At 12/31/98 Co changed its method of acct for demo cost feom writig off the costs over two years to expensing the cost immediatly . Co made the change in recognition of an increasing number of demos placed with customers that did not result in sales . Co had defrred demo costs of $500,000 at 12/31/97 $300,000 of which were to be written off in 1998 and the remainder in 1999. Co income tax rate is 30%. In its 1998 financial statements , what amount should co report as cumulative effect of change in acct principle ?

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

The answer is 0 . I understand why but can some one explain how it should be recoded.

THANK YOU

Hey ,

I am a bit confuse because of the wording.  Does "Write off" means expense ?

I know it is  stupid Q, But what the difference between write off an item  and expense an  item ?

In 2008 they will expensed the full $500,000..it is a prospective change , estimate change.  Right ? No cumulative recording

I HATE FAR section !

Thank You