Recording and Reporting a Change in Estimated Useful Life A company has been depreciating equipment using a 10-year life on a straight-line basis. The equipment, which costs $50,400, was purchased on January 1 of Year 1. The equipment has an estimated residual value of $12,600. On January 1 of Year 5, management decides to depreciate the equipment over a total life of 14 years instead of 10, with no change in the estimated residual value. The annual financial statements are prepared on a comparative basis (Year 4 and Year 5 are presented). Income before depreciation for Year 4 and Year 5 was $104,580 and $110,880, respectively. Ignore income tax. Required a. Prepare the journal entries to be recorded in Year 1 through Year 4 for annual depreciation. b. Determine the ending balance in accumulated depreciation on December 31 of Year 1 through Year 4. c. Prepare the entry to record depreciation expense in Year 5, the year of the change. d. Illustrate how the change should be reported on the Year 5 balance sheet and income statement, which are accompanied by the Year 4 results for comparative purposes. Include the earnings per share disclosure. Shares of common stock outstanding are 100,000. Note: Do not use negative signs with your answers. a. Date Dec. 31, Year 1 Account Name Dr. Cr. 0 0 0 0 To record depreciation. Dec. 31, Year 2 0 0 0 0 To record depreciation. Dec. 31, Year 3 0 0 0 0 To record depreciation. Dec. 31, Year 4 0 0 0 To record depreciation.