Reference no: EM131746212
1. Type of accounting change.
2. Manner of reporting the change under current generally accepted accounting principles including
a discussion, where applicable, of how amounts are computed.
3. Effect of the change on the balance sheet and income statement.
4. Footnote disclosures that would be necessary.
Case 1- Mikes started his company in 2014 using cash accounting, at the end of 2017 his new accountant is recommending that they must go to accrual accounting.
Case 2 -Mike's accountant recorded $240,000, received on November 30th of 2016, as revenue. It represented an advance payment for a 2 year service contract starting December 1st of 2016.
Case 3- Mike's company received a bill on Dec 1st 2016 from workers compensation indicating that they had not classified their employees correctly and would have to pay fines of $300,000. After discussing it with his attorney's, he received a possible range of between $25,000 to $200,000 in liability for the violation. When the financial statements were issued in 2016, a settlement had not been made with state authorities, so they accrued a contingent liability of $25,000. Late in 2017, a settlement was reached with state authorities to pay a total of $100,000 in penalties.
Case 4 Mike's accountant decided to change from double declining balance to straight-line for all tangible assets on January 1 2017.