Accounting Changes The controller of Baldwin Corporation found an error in recording prepaid insurance in the previous year. A payment for a 5-year policy was charged to expense entirely in the year of payment. In addition, the controller decided to change in the current year from straight-line to double-declining-balance depreciation on equipment used in the general headquarters. He also has concluded that the general headquarters building should be depreciated over a 30-year life rather than the 40-year life currently being used.

a. Compare the accounting treatments used in connection with (1) the correction of an error, (2) a change from one generally accepted accounting principle to another, and

(3) a change in accounting estimate.

b. Explain why different procedures are used.

c. What will be the impact of each of the 3 items on net income reported by Baldwin Corporation for the current year? Explain.