On 1/2/X1, Southern Company purchased equipment for $100,000 and has recorded straight-line depreciation each year based on a 10 year life. At the end of 4 years on 12/31/X4, it has become apparent to Southern that the assets will only have a remaining useful life of 2 years. Based on this information, Southern is required to do which of the following?

Select one:

a. On 12/31/X4, Southern should Debit a Loss for $26,667 and Credit Accumulated Depreciation for $26,667.

b. On 12/31/X4, Southern should retrospectively recalculate depreciation back to 1/1/X1 based on a 6-year life and adjust its Retained Earnings and Accumulated Depreciation accounts accordingly.

c. Southern should make no entries on 12/31/X4, but must record $30,000 of depreciation expense in years X5 and X6.

d. Southern must present a footnote to its 12/31/X4 financial statements describing the change in estimate and provide justification for the change.

e. None of the Above