Each of the following situations occurred during 2018 for one of your audit clients:1. The write-off of inventory due to obsolescence.2. Discovery that depreciation expenses were omitted by accident from 2017’s income statement.3. The useful lives of all machinery were changed from eight to five years.4. The depreciation method used for all equipment was changed from the declining-balance to the straight-linemethod.5. Restructuring costs were incurred.6. The Stridewell Company, a manufacturer of shoes, sold all of its retail outlets. It will continue to manufactureand sell its shoes to other retailers. A loss was incurred in the disposition of the retail stores. The retail storesare considered a component of the entity.7. The inventory costing method was changed from FIFO to average cost.Required:1. For each situation, identify the appropriate reporting treatment from the list below (consider each event to bematerial):a. As an unusual gain or lossb. As a prior period adjustmentc. As a change in accounting principled. As a discontinued operatione. As a change in accounting estimatef. As a change in accounting estimate achieved by a change in accounting principle
Each of the following situations occurred during 2018 for one of your audit clients:
1. The write-off of inventory due to obsolescence.
2. Discovery that
3. The useful lives of all machinery were changed from eight to five years.
4. The depreciation method used for all equipment was changed from the declining-balance to the straight-line
method.
5. Restructuring costs were incurred.
6. The Stridewell Company, a manufacturer of shoes, sold all of its retail outlets. It will continue to manufacture
and sell its shoes to other retailers. A loss was incurred in the disposition of the retail stores. The retail stores
are considered a component of the entity.
7. The inventory costing method was changed from FIFO to average cost.
Required:
1. For each situation, identify the appropriate reporting treatment from the list below (consider each event to be
material):
a. As an unusual gain or loss
b. As a prior period adjustment
c. As a change in accounting principle
d. As a discontinued operation
e. As a change in accounting estimate
f. As a change in accounting estimate achieved by a change in accounting principle
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
