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 machinery from the double-declining-balance method to the units-of-production method effective January 1, 2020. 2. Effective January 1, 2020, Sports-Pro appropriately changed the salvage values used in computing depreciation for its office equipment. 3. On December 31, 2020, Sports-Pro appropriately changed the specific subsidiaries constituting the group of companies for which consolidated financial statements are presented. Instructions Write a 1–1.5 page letter to Joe Davison explaining how each of the above changes should be presented in the December 31, 2020, financial statements.

Question

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 machinery from the double-declining-balance method to the units-of-production method effective January 1, 2020.
  • 2. Effective January 1, 2020, Sports-Pro appropriately changed the salvage values used in computing depreciation for its office equipment.
  • 3. On December 31, 2020, Sports-Pro appropriately changed the specific subsidiaries constituting the group of companies for which consolidated financial statements are presented.

Instructions

Write a 1–1.5 page letter to Joe Davison explaining how each of the above changes should be presented in the December 31, 2020, financial statements.

 

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