Question 2 Change in Estimate Depreciation

Prior Inc. purchased equipment for $510,000, which was estimated to have a useful life of 10 years with a residual value of $10,000 at the end of that time. Depreciation has been entered for seven years on a straight-line basis. In 2020, it is determined that the total estimated life should be 15 years with a residual value of $5,000 at the end of that time.

Required:

a. (5 marks) Prepare the entry (if any) to correct the prior years' depreciation.

b. (5 marks) Prepare the entry to record depreciation for 2020.