Amazon.com, Inc., the online retail shopping and video subscription company, reported a change in an accounting estimate in the first quarter of 2020. Use the following information and excerpts from its financial statements to analyze the change and its effect on the financial statements.

a. What accounting change did Amazon make?

b. What reason(s) does Amazon give for making this change?

c. What method did Amazon use to account for this change?

d. What would Amazon’s net income and diluted earnings per share have been in the first quarter of 2020 if it did not make the change? Comment on the difference.

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Amazon.com Inc., Financial Statement Excerpts, March 31, 2020 Accounting Policies (excerpt) Use of Estimates We review the useful lives of equipment on an ongoing basis, and effective January 1, 2020 we changed our estimate of the useful life for our servers from three to four years. The longer useful life is due to continuous improvements in our hardware, software, and data center designs. The effect of this change in estimate for Q1 2020, based on servers that were included in "Property and equipment, net" as of December 31, 2019 and those acquired during the quarter ended March 31, 2020, was a reduction in depreciation and amortization expense of $786 million and an increase in net income of $602 million, or $1.21 per basic share and $1.19 per diluted share. Source: Amazon.com, Inc., Financial Statement, March 31, 2020. https://ir.aboutamazon.com/sec-filings/ sec-filings-details/default.aspx?FilingId=14112620. Below is select financial statement information for the first quarter ended March 31, 2020. (in millions, except per share amount) Sales Cost of sales Net income Diluted earnings per share $75,452 44,257 2,535 5.01