On January 2, year 3, to better reflect the variable use of its only machine, Holly, Inc. elects to change its method of depreciation from the straight-line method to the units-of-production method. The original cost of the machine on January 2, year 1 , is $50,000, and its estimated life is ten years. Holly estimates that the machine's total life is 50,000 machine hours. Machine-hour usage was 8,500 during year 2 and 3,500 during year 1 . Machine-hour usage for year 3 is 3,800 . Holly's income tax rate is 30%. Holly should report the accounting change in its year 3 financial statements as a(an) Estimate change recognizing $3,800 of depreciation in year 3 . Estimate change recognizing $4,000 of depreciation in year 3 . Cumulative effect of a change in accounting principle of $1,400 in its income statement. Adjustment to beginning retained earnings of $1,400