On 1/2/X1 Southern company purchased equipment for 100,000 and has recorded SL 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 asset will only have a remaining useful life of 2 years. Based on this information, Southern is required to do which of the following?

1. On 12/31/X4 Southern should debit a loss for 26,667 and credit accum. Depr. For 26,667
2. On 12/31/x4 Southern should retrospectively recalculate depreciation back to 1/1/x1 based on a 6-year life and adjust RE and Accumulated Depreciation accordingly
3. Southern should make no entries on 12/31/X4, but must record 30,000 of Depr. Exp. In years x5 and x6
4. Southern must present a footnote to its 12/31/x4 financial statements describing the change in estimate and provide justification
5. None of the above