1. Your audit manager asks you how to account for each of the following situations that current clients have encountered.

You are to identify the appropriate accounting treatment of each independent situation (from choice 1 -6 below) and describe to the manager how the specific situation should be handled in the financial statements (or not at all) in complete detail. Assume that each scenario has a material impact on the clients financial statements.

1. JC Penneys closed a third of its stores.
2. American Airlines changed the useful lives of its planes from 10 years to 15 years.
3. A client discovered that 2019s depreciation expense was overstated.
4. Another client switched its inventory costing method from weighted average to FIFO.
5. The company owning the Washington Post sold off its online education division to the Pordue University.
6. A company making high-tech components for self-driving cars took an inventory write-down when Tesla decided to use a different technology.
7. A company changed its depreciation method from sum-of-the-years digits to straight-line.
8. An exporter had to record a loss related to its accounts receivable denominated in pounds sterling.

+ | 1. 2. 3. 4. 5. 6. As an unusual gain or loss As a prior period adjustment As a change in accounting principle As discontinued operations As a change in accounting estimate As a change in accounting estimate achieved by a change in accounting principle