George Young Industries (GYI) acquired industrial robots at the beginning of 2018 and added them to the company’s assembly process. During 2021, management became aware that the $1 million cost of the machinery was inadvertently recorded as repair expense on GYI’s books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property. Cost deducted over 7 years by the modified accelerated recovery system as follows: 

Year......................................MACRS Deductions 

2018.....................................$   142,900 

2019.....................................244,900 

2020.....................................174,900 

2021.....................................124,900 

2022.....................................89,300 

2023.....................................89,200 

2024.....................................89,300 

2025.....................................44,600 

Totals.....................................$1,000,000

The tax rate is 25% for all years involved. 

Required: 

1. Prepare any journal entry necessary as a direct result of the error described. 

2. Will GYI account for the change (a) retrospectively or (b) prospectively? 3. Prepare the adjusting entry for 2021 depreciation.