Change in Principle, Estimate
Response to the following problem:
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, 2014.
2. Effective January 1, 2014, Sports-Pro appropriately changed the salvage values used in computing depreciation for its office equipment.
3. On December 31, 2014, Sports-Pro appropriately changed the specific subsidiaries constituting the group of companies for which consolidated financial statements are presented.
Instructions
Write a 1 to 1.5 page letter to Joe Davison explaining how each of the above changes should be presented in the December 31, 2014, financial statements.