AlNahdy Co. purchased equipment for $150,000 which was estimated to have a useful life of 5 years with a residual value of $5,000 at the end of that time. Depreciation has been entered for 3 years on a straight-line basis. In 2020, it is determined that the total estimated life should be 8 years with a residual value of $3,000 at the end of that time.

Instructions: (Explain all necessary calculations)

1. Prepare the entry (if any) to correct the prior years' depreciation. (1 mark)

2. Calculate the depreciation amount for 2020. (Explain all necessary calculations)

(2.5 marks)

3. Prepare the entry to record depreciation for 2020. (1.5 marks)