Assignment problem - Chapter 21 Thor Corp.'s reported pretax incomes for 2020 and the previous two years as follows: 2020 2019 2018 $150,000 $125,000 $95,000 Pre-tax income in each of the three years was determined before taking into account the following accounting changes and errors (the errors were made in previous years but were not discovered until 2020). 1. Early in 2020, Thor determined that equipment purchased in January 2018 for $136,000, with an estimated life of eight years and residual value of $6,000, is now estimated to have a total eleven-year life (from the date of purchase), but will have only a $1,800 residual value. Thor is using straight-line depreciation for this equipment. 2. Thor discovered that depreciation expense had been understated by $17,000 in 2019, owing to the fact that an adjusting entry for depreciation on machinery was not recorded. 3. On January 1, 2017, Thor bought a piece of machinery for $108,000, with a $12,000 estimated residual value and an eight-year life. At that time, the bookkeeper debited an expense account for this purchase. Thor uses the double-declining depreciation method. 4. Thor, in reviewing its allowance for doubtful accounts during 2020, has determined that 1% is the appropriate amount of bad debt expense to be recorded. The company had been using 1.5% as its rate in 2019 and 2018 when the expense had been $14,000 and $10,000, respectively. Thor would have recorded $24,000 in bad debt expense for 2020 if they had used the old rate. 5. At the beginning of 2020, Thor decided to change from the average cost method of valuing inventories to FIFO, and used FIFO all during 2020 (perpetual system). They have determined that the opening inventory at January 1, 2020, which was $55,500 using average cost, would have been $52,500 using FIFO. Assume this change will make their financial statements more reliable and relevant. Instructions a. For each situation above, identify the type of accounting change the situation represents and the appropriate accounting treatment (retrospective or prospective). b. Prepare any necessary journal entries that would be recorded in 2020 to account for the situation. If no journal entries are required, write "none". Ignore income taxes.