Assume you are the accountant for a small business. Consider the following situation.

On January 2, 2017, the business purchased a large piece of equipment for $500,000. At that time, you used straight line depreciation, with no salvage value to depreciate the equipment over 10 years. It is now January 2, 2020 and you realize that your estimate on the useful life was inaccurate. You now estimate that the equipment will only be useful for 7 years from the date of acquisition.

Write a message to the President, Janice Brownie, describing how this change will affect the 2020 financial statements, both the income statement and balance sheet. Explain how you calculated the new depreciation expense and accumulated depreciation. Also, discuss how this change will affect prior years financial statements.

Remember your audience. Your message must be concise and completely free of spelling and grammatical errors. Refer to the textbook, Change in Estimates for Depreciation. Try to be unique from the others in getting your message across.

(USGAAP for the treatment of depreciation and prior period items)