On January 1, 2019, Neal Corporation acquired equipment at a cost of $840,000. Neal adopted the sum-of-the-years-digits method of depreciation for this equipment and had been recording depreciation over an estimated life of eight years, with no residual value. At the beginning of 2022, a decision was made to change to the straight-line method of depreciation for this equipment. Neal presents two years of comparative financial statement data. With regard to this change, Neal will need to

Select one:

apply the new depreciation method prospectively.

adjust the beginning balance of 2022 retained earnings to reflect the difference in depreciation expense between the two methods.

adjust the beginning balance of 2021 retained earnings to reflect the difference in depreciation expense between the two methods.

restate the financial statements for 2022 and 2021 to reflect depreciation expense based on the new depreciation method.