3. Presented below are accounting procedures that are being used by Pers Hoop Shop Inc. Identify if it is an appropriate procedure and your theoretical support for that judgment.

A) The policy of Pers Hoop Shop is to use the straight-line depreciation method for financial statement purposes and the double-declining balance method for tax purposes. In 2021, the bookkeeper used the double-declining method for both financial statement and tax purposes. Depreciation for 2020, 2021, and 2022 has been reported in the firms income statement using the straight-line method.

B) On June 25, 2021 the company filed a lawsuit against a competitor for trademark infringement. The company is asking the court to prevent the competitor from using an advertising logo in the future and for damages of $1,000,000 ($40,000 to cover profits from lost sales and $960,000 punitive). The jury returned a verdict favorable to Pers Hoop Shop on March 2, 2023 awarded damages of $650,000. On March 6, 2023, the defendant filed its appeal of the verdict. Pers Hoop Shops attorney indicated there is a 85% probability that the appeals court will uphold the jury verdict. The company did not include the damage award in its financial statements for fiscal 2022.