Pinnacle Corporation has been using the straight-line depreciation method to depreciate some office equipment that was acquired at the beginning of 2013. At the beginning of 2016, Pinnacle decided to change to the sum-of-the-years'-digits method. The equipment cost $120,000 and is expected to have no salvage value. The estimated useful life of the equipment is five years. The tax rate is 30%.
Required:
a. Prepare the journal entry, if any, to record the accounting change at the beginning of 2016.
b. Blue Co. can estimate the amount of loss that will occur if a foreign government expropriates some of the company's assets in that country. If the likelihood of expropriation is remote, a loss contingency should be:
Disclosed but not accrued as a liability.
Accrued as liability but not disclosed.
Disclosed and accrued as a liability.
Neither accrued as a liability nor disclosed.