45 ) Effective January 1 , 2007 , Quayle Co . established a definedbenefit plan with no retroactive benefits . The first of the required equal annual contributions wa s paid on December 31 , 2007 . A 10 % discount rate was used to calcul ate service cost and a 10 % rate of return was assumed for plan assets . All information on covered employees for 2007 and 2008 is the same . How should the service cost for 2008 compare with 2007 , and should the 2007 balance sheet report an accrued or a prepaid pension cost ? Service Cost for 2008 Compared to 2007 | Pension Cost Reported on t he 2007 Balance Sheet A . Greater than | Accrued B . Equal to | Accrued C . Equal to | Prepaid D . Greater than | Prepaid 46 ) On January 1 , 2005 , Lynn Corporation acquired equipment at a co st of $ 600,000 . Lynn adopted the doubledeclining balance method of depreciation for this equipment and had been recording depreciation over an estimated life of eight years , with no residual value . At the beginning of 2008 , a decision was made to c hange to the straightline method of depreciation for this equipment . Assuming a 30 % tax r ate , the cumulative effect of this accounting change on beginning retai ned earnings , net of tax , is A . $ 78,750 . B . $ 121,875 . C . $ 0 . D . $ 77,109 . 47 ) On January 1 , 2005 , Baden Co ., purchased a machine ( its only de preciable asset ) for $ 300,000 . The machine has a fiveyear life , and no salvage value . Sum-of-the-years ‟ - digits depreciation has been used for financial statement reporting and the elective straightline method for income tax reporting . Effective January 1 , 2008 , for fi nancial statement reporting , Baden decided to change to the straightline method for depreciation of the machine . Assume that Baden can j ustify the change . Baden ‟ s income before depreciation , before income taxes , and before the cumulative effect of the accounting change ( if a