During 2008, the following various events (consider each to be independent and material) occurred at several of your CPA firm’s clients.
il. Martin Manufacturing’s production facility is located near Miami, Florida. Two hurricanes (one considered major) struck southern Florida in 2008. One of the storms caused extensive damage to Martin’s plant.
. ACF, Inc. manufactures railroad tank cars and has been doing so since the 1960s. Because some of ACF’s production equipment had become obsolete, the equipment was sold at a loss and new equipment acquired.
. Furman Foods produces canned and frozen foods that are private labeled for various supermarket chains. Because profit margins on the frozen food operation were disappointing, Furman sold it to a competitor, taking a loss on the sale.
. SFAS No. 142, issued in June 2001, altered accounting for goodwill. Annual amortization of goodwill is no longer required; instead, goodwill must be periodically evaluated for impairment. If no impairment has occurred, goodwill should not be amortized.
Unfortunately, the controller at Jensen Company overlooked this mandated change in accounting principles and continued to amortize goodwill in keeping with past practices. This fact was discovered only this year. (Assume that Jensen’s goodwill is not impaired.)
. Smithfield Corporation restructured its operations. The company consolidated its five regional offices into three operating districts, thus enabling two regional headquarters facilities to be closed and staff to be reassigned or terminated. Although Smithfield believes this restructuring will save money in the long term, it incurred a loss when these facilities were closed.
- Magnum Motors changed its method of inventory valuation. As the only “FIFO company” in the industry, Magnum’s management believed that readers of the company’s financial statements would find them more useful if Magnum used LIFO as do its competitors.

. Andy’s Colors, a paint manufacturer, decided to discontinue the manufacture of latex paints. The company’s line of oil-based paints will be continued. These two paint lines are separable both operationally and financially. Andy’s management found a buyer for the latex paint manufacturing facilities. Unfortunately, some environmental problems were discovered during the buyer’s examination of these facilities and the sale is on hold pending a resolution of this matter. Andy’s management believes this problem can be satisfactorily dealt with, but that it may take a few years to do so.
Required:
Briefly discuss the 2008 financial statement presentation of each of the preceding events.
Ignore earnings per share disclosures.