Larry Corp. purchased a capital asset for $156,000 in early 20X3. Management estimated that the asset would have a 10-year life with an estimated residual value of $23,000 and would be depreciated on a straight-line basis with a full years depreciation in the year of purchase. In 20X5, management decides to change the depreciation method to 10% declining balance. This is a change in policy because the change is motivated by a desire to conform to industry practice. The tax rate is 35%. Required: 1. Calculate depreciation expense for 20X320X5, inclusive, using the old policy and then the new policy.

2. Calculate the effect of the change on opening 20X5, 20X4, and 20X3 retained earnings, if any.