1. Below are four independent, material and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting or closing entries were prepared. Assume a tax rate of 40% and any tax effects are adjusted through the deferred tax asset or liability account. Discuss and evaluate the type of accounting change, briefly describe any steps that should be taken to appropriately report the situation, if you wish to complete journal entries to document the change, please feel free to do so.

a) On December 31, 2009, Laurie Inc. acquired its office building at a cost of $8,000,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no salvage value. Plans were finalized in 2018 to relocate the company headquarters at the end of 2019. The vacated office building will have a salvage value at that time of $2,800,000.

b) At the beginning of 2013, Sam Corp. purchased office equipment at a cost of $1,200,000. Its useful life was estimated to be ten years with no salvage value. The equipment has been depreciated by the sum-of-theyears digits method. On January 1, 2018, the company changed to the straight-line method.

c) Kirtan Company changed its inventory cost method to LIFO from FIFO at the beginning of 2018 for both financial statement and income tax purposes. Under FIFO, the inventory at January 1, 2018 was estimated to be $15 million. A LIFO reserve at the end of 2018 was calculated to be $706,000.

d) Gino Inc. introduced a new line of auto covers in 2017 that carry a one-year warranty against manufacturers defects. Based on industry experience, warranty costs are expected to approximate 4% of sales. Sales of the covers in 2017 were $1,500,000. Warranty expense and warranty liability of $60,000 was recorded in 2017. In late 2018, the companys claims experience was evaluated, and it was determined that claims were far fewer than expected and 3% rather than 4% was recommended. Sales of the covers in 2018 amounted to $3,200,000 and warranty expenditures in 2018 totaled $72,000.