TechWave Inc. acquired new computer equipment on January 1, 20X1, for $600,000. The equipment has an estimated residual value of $30,000 and an estimated useful life of 5 years. TechWave uses the straight-line method for depreciation. On July 1, 20X1, the company decided to upgrade the equipment, adding features that cost $100,000 and extended the useful life by an additional 2 years. By December 31, 20X1, the company also revised the residual value to $20,000 based on market trends.

Required:

1. Calculate the annual depreciation expense for the year ending December 31, 20X1, before and after the upgrade and residual value revision.
2. Prepare the necessary journal entries to record the depreciation for the year and the upgrade.
3. Discuss the impact of the upgrade and residual value revision on the company’s financial statements.
4. Explain how these changes will affect future depreciation calculations and the company’s net income.