1. a. What is income smoothing? What is its purpose? b. Give three reasons why business managers prefer stable earnings trends? 2. List and describe five reasons why income reporting is important to our economic society. 3. Under the provisions of FASB ASC 606 a. When does a company satisfy a performance obligation? b. What are the indicators of the satisfaction of a performance obligation? 4. It is important in accounting theory to be able to distinguish the types of accounting changes. a. If a public company desires to change from the sum-of-year's-digits depreciation method to the straight-line method for its fixed assets, what type of accounting change will this be? How would it be treated? b. Changing specific subsidiaries comprising the group of companies for which consolidated financial statements are presented is an example of what type of accounting change? How would it be treated? c. A company determined that the depreciable lives of its fixed assets were currently too long to fairly match the cost of the fixed assets with the revenue produced. The company decided at the beginning of the current year to reduce the depreciable lives of all its existing fixed assets by five years. What type of accounting change will this be? How would it be treated? d. Gary Company owned 51 percent of Allen Company, at which time Gary reported its investment using the cost method owing to political uncertainties in the country in which Allen was located. Later, the management of Gary Company was satisfied that the political uncertainties were resolved and that the assets of the company were in no danger of nationalization. Accordingly, Gary will prepare consolidated financial statements for Gary and Allen. What type of accounting change will this be and how will be it be treated? e. A company decides to adopt the straight-line method of depreciation for plant equipment. This method will be used for new acquisitions as well as for previously acquired plant equipment for which depreciation had been provided on an accelerated basis. What type of accounting change is this and how will it be treated