Williams-Santana,Inc., is a manufacturer of high-tech industrial parts that wasstarted in 2006 by two talented engineers with little businesstraining. In 2018, the company was acquired by one of its majorcustomers. As part of an internal audit, the following facts werediscovered. The audit occurred during 2018 before any adjustingentries or closing entries were prepared. The income tax rate is40% for all years.

1. A five-year casualty insurance policy was purchased at thebeginning of 2016 for $35,000. The full amount was debited toinsurance expense at the time.
2. Effective January 1, 2018, the company changed the salvagevalues used in calculating depreciation for its office building.The building cost $600,000 on December 29, 2007, and has beendepreciated on a straigh-tline basis assuming a useful life of 40years and a salvage value of $100,000. Declining real estate valuesin the area indicate that the salvage value will be no more than$25,000.
3. On December 31, 2017, merchandise inventory was overstated by$25,000 due to a mistake in the physical inventory count using theperiodic inventory system.
4. The company changed inventory cost methods to FIFO from LIFO atthe end of 2018 for both financial statement and income taxpurposes. The change will cause a $960,000 increase in thebeginning inventory at January 1, 2019.
5. At the end of 2017, the company failed to accrue $15,500 ofsales commissions earned by employees during 2017. The expense wasrecorded when the commissions were paid in early 2018.
6. At the beginning of 2016, the company purchased a machine at acost of $720,000. Its useful life was estimated to be ten yearswith no salvage value. The machine has been depreciated by thedouble-declining balance method. Its book value on December 31,2017, was $460,800. On January 1, 2018, the company changed to thestraight-line method.
7. Warranty expense is determined each year as 1% of sales. Actualpayment experience of recent years indicates that 0.75% is a betterindication of the actual cost. Management effects the change in2018. Credit sales for 2018 are $4,000,000; in 2017 they were$3,700,000.

Required:
For each situation:
1. Identify whether it represents an accountingchange or an error. If an accounting change, identify the type ofchange. For accounting errors, choose "Not applicable".
2. Prepare any journal entry necessary as a directresult of the change or error correction as well as any adjustingentry for 2018 related to the situation described. Any tax effectsshould be adjusted for through Income tax payable or Refund incometax.