7 Not complete Marked out of 0.62 Flag question Recording and Reporting a Change in Estimated Useful Life A company has been depreciating equipment using a 10-year life on a straight-line basis. The equipment, which costs $60,000, was purchased on January 1 of Year 1. The equipment has an estimated residual value of $15,000. On January 1 of Year 5, management decides to depreciate the equipment over a total life of 14 years instead of 10, with no change in the estimated residual value. The annual financial statements are prepared on a comparative basis (Year 4 and Year 5 are presented). Income before depreciation for Year 4 and Year 5 was $124,500 and $132,000, respectively. Ignore income tax. Required a. Prepare the journal entries to be recorded in Year 1 through Year 4 for annual depreciation. b. Determine the ending balance in accumulated depreciation on December 31 of Year 1 through Year 4. c. Prepare the entry to record depreciation expense in Year 5, the year of the change. d. Illustrate how the change should be reported on the Year 5 balance sheet and income statement, which are accompanied by the Year 4 results for comparative purposes. Include the earnings per share disclosure. Shares of common stock outstanding are 100,000. Note: Do not use negative signs with your answers. a. Date Dec. 31, Year 1 Dec. 31, Year 2 Dec. 31, Year 3 Account Name To record depreciation. To record depreciation. To record depreciation. Dec. 31, Year 4 To record depreciation, < < < < > > > > Dr. 00 Cr. 0 0 0 0 0 0 0 0 0 0 0 O O 0 0 d. b. Accumulated depreciation, December 31, Year 4 $ 0. Date Dec. 31, Year 5 Account Name To record depreciation. Balance Sheet, Dec. 31 Equipment Less: Accumulated depreciation Equipment, net Year 4 Year 5 $ 0 $ 0 0 0 $ 0 $ 0 Income Statement Income prior to depreciation and accounting change $ Depreciation expense Net income < < Year 4 Year 5 0 $ 0 0 0 $ 0 $ 0 Numerator / Denominator = Result Earnings per share Year 4 $ 0 / 0 $ Earnings per share Year 5 $ 0 / 0 = $ Dr. Cr. 0 0 0 0