Problem 20-17 (Algo) Integrating problem; error; depreciation; deferred taxes [LO20-6]

George Young Industries (GYI) acquired industrial robots at the beginning of 2018 and added them to the companys assembly process. During 2021, management became aware that the $2.5 million cost of the equipment was inadvertently recorded as repair expense on GYIs books and on its income tax return. The industrial robots have 10-year useful lives and no material salvage value. This class of equipment is depreciated by the straight-line method for financial reporting purposes and for tax purposes it is considered to be MACRS 7-year property. Cost deducted over 7 years by the modified accelerated recovery system as follows:

Year	MACRS Deductions
2018	$	357,250
2019		612,250
2020		437,250
2021		312,250
2022		223,250
2023		223,000
2024		223,250
2025		111,500
Totals	$	2,500,000

The tax rate is 25% for all years involved. Required: 1. & 3. Prepare any journal entry necessary as a direct result of the error described and the adjusting entry for 2021 depreciation. 2. Will GYI account for the change (a) retrospectively or (b) prospectively?