Greta Inc. is a private company that follows ASPE. The company has always had a policy to expense development costs. However, it is now looking to acquire some funding from an independent investor. The investor has requested that management change its accounting policy to capitalize all development costs. The investor has a number of other small companies that follow this policy, so they want to ensure comparability. Greta Inc. does not have any other major shareholders or creditors.
The company has created the following summary, showing the total amortization had these costs been capitalized:

Required:
1. Determine the restatements that Greta Inc. will need to make to net earnings for each year, and the necessary 20X8 adjusting entry. The income tax rate is 30%.
2. Explain when accounting policy changes are appropriate under ASPE. If the investor did not request this change, would management still be able to do it?

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20X3 20X4 20X5 20X6 20X7 Carrying Value, Beginning 0 172,480 266,144 244,987 262,710 Costs Incurred 215,600 160,200 40,090 83,400 236,400 Amortization 43,120 66,536 61,247 65,677 99,822 Carrying Value, Ending 172,480 266,144 244,987 262,710 399,288