Case Study Question: As a reviewer of the BC Securities Commission, you are in the process of reviewing the financial statements of public companies.
The following items have come to your attention:
1. A mining company sells a foreign subsidiary that does uranium mining, although the company continues to mine uranium in other countries.
2. A retail outlet changed its calculation for bad debt expense from 1% to 0.5% of sales because of changes in its clientele.
3. An automobile dealer sells for $137,000 an extremely rare 1930 S type Invicta, which is purchased for $21,000 10 years ago. The Invicta is the only such display item that the dealer owns.
4. A steel company changes from straight line amortization to accelerated amortization in accounting for its plant assets.
5. A construction company, at great expense to itself, prepares a major proposal for government loan. The loan is not approved
6. A water pump manufacturer has had large losses resulting from a strike by its employees early in the year.
7. Amortization for a prior period was incorrectly understated by $950,000. The error was discovered in the current year
8. A large sheep rancher suffered a major loss because the provincial government required that all sheep in the province be killed to halt the spread of a rare disease. Such a situation has not occurred in the province for 20 years.
9. A food distributor that sells wholesale to supermarket chains and to fast food restaurants (two major classes of customers) decides to discontinue the division that sells to one of the two classes of customers.
Instructions: State and Discuss the issue in each situation!