Sometimes a business entity changes its method of accounting for certain items. The change may be classified
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The company decided at the beginning of the current year to reduce the depreciable lives of all its existing fixed assets by five years. Situation 2 On December 31, 2013, Gary Company owned 51 percent of Allen Company, at which time Gary reported its investment using the cost method owing to political uncertainties in the country in which Allen was located. On January 2, 2014, the management of Gary Company was satisfied that the political uncertainties were resolved and that the assets of the company were in no danger of nationalization. Accordingly, Gary will prepare consolidated financial statements for Gary and Allen for the year ended December 31, 2014. Situation 3 A company decides in January 2014 to adopt the straight- line method of depreciation for plant equipment.
This method will be used for new acquisitions as well as for previously acquired plant equipment for which depreciation had been provided on an accelerated basis.
Required:
For each of the preceding situations, provide the information indicated below. Complete your discussion of each situation before going on to the next situation.
a. Type of accounting change b. Manner of reporting the change under current GAAP, including a discussion, where applicable, of how amounts are computed
c. Effects of the change on the statement of financial position and earnings statement
d. Required e disclosures
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...
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Related Book For
Financial Accounting Theory and Analysis Text and Cases
ISBN: 978-1118582794
11th edition
Authors: Richard G. Schroeder, Myrtle W. Clark, Jack Cathey
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