As a reviewer for the Ontario Securities Commission, you are in the process of reviewing the financial statements of public companies. The following items have come to your attention: 1. A merchandising company overstated its ending inventory two years ago by a material amount. Inventory for all other periods is correctly calculated. 2. An automobile dealer sells for $137,000 an extremely rare 1930 S-type Invicta, which it purchased for $21,000 10 years ago. The Invicta is the only such display item that the dealer owns. 3. During the current year, a drilling company extended the estimated useful life of certain drilling equipment from 9 to 15 years. As a result, amortization for the current year was materially lowered. 4. A retail outlet changed its calculation for bad debt expense from 1% to 0.5% of sales because of changes in its clientele. 5. A mining company sells a large foreign subsidiary that does uranium mining, although the company continues to mine uranium in other countries. 6. A steel company changes from straight-line depreciation to accelerated amortization in accounting for its plant assets, stating that the expected pattern of consumption of the future economic benefits has changed. 7. A construction company, at great expense to itself, prepares a major proposal for a government loan. The loan is not approved. 8. A water pump manufacturer has had large losses resulting from a strike by its employees early in the year. 9. Amortization for a prior period was incorrectly understated by $950,000. The error was discovered in the current year. 10. A large sheep rancher suffered a major loss because the provincial government required that all sheep in the province be killed to halt the spread of a rare dis- ease. Such a situation has not occurred in the province for 20 years. 11. A food distributor that sells wholesale to supermarket chains and to fast-food restaurants (two major classes of customers) decides to discontinue the division that sells to one of the two classes of customers. Instructions Discuss the financial reporting issues.