Bailand Company purchased a building for $366,000 that had an estimated residual value of $16,000 and an estimated service life of 10 years. Bailand purchased the building 4 years ago and has used straight-line depreciation. At the beginning of the fifth year (before it records depreciation expense for the year), the following independent situations occur:

1. Bailand estimates that the asset has 8 years life remaining (for a total of 12 years).

2. Bailand changes to the sum-of-the-years-digits method.

3. Bailand discovers that the estimated residual value has been ignored in the computation of depreciation expense.