Overstated depreciation under reducing balance increases profit upon correction to straight-line Steps:

• Recorded depreciation using reducing balance: 30% × $20,000 =$6,000.
• Correct depreciation using straight-line: $20,000 ÷ 5 years =$4,000.
• Excess expense recorded: $6,000 –$4,000 = $2,000.
• Correction reduces depreciation expense by $2,000, increasing profit by$2,000. Why A is correct:
• Depreciation expense under reducing balance exceeds straight-line in year 1; adjustment lowers expense per accounting error correction rules (IAS 8), boosting profit by the $2,000 difference. Why the others are wrong:
• B: Applies if straight-line exceeded reducing balance, but reducing balance is higher here.
• C: Equals recorded reducing balance amount, not the net adjustment effect.
• D: Doubles the actual $2,000 difference without basis.

Final answer: A