Change in Principle, Estimate As a certified public accountant you have been contacted by Joe Davison, CEO
Question:
Change in Principle, Estimate As a certified public accountant you have been contacted by Joe Davison, CEO of Sports-Pro Athletics, Inc., a manufacturer of a variety of athletic equipment. He has asked you how to account for the following changes.
1. Sports-Pro appropriately changed its depreciation method for its production machinery from the double-declining balance method to the production method effective January 1, 2010.
2. Effective January 1, 2010, Sports-Pro appropriately changed the salvage values used in computing depreciation for its office equipment.
3. On December 31, 2010, Sports-Pro appropriately changed the specific subsidiaries constituting the group of companies for which consolidated financial statements are presented. Write a 1–1.5 page letter to Joe Davison explaining how each of the above changes should be presented in the December 31, 2010, financial statements.
DepreciationDepreciation is an important concept in accounting. By definition, depreciation is the wear and tear in the value of a noncurrent asset over its useful life. In simple words, depreciation is the cost of operating a noncurrent asset producing... Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0470423684
13th Edition
Authors: Donald E. Kieso, Jerry J. Weygandt, And Terry D. Warfield