Case 6-11 Classification of Income Statement Items

You are in charge of reviewing the classification of unusual items that have occurred during for your CPA firm during the current year. The following material items have come to your attention:

A department store incorrectly overstated its ending inventory 2 years ago. Inventory for all other periods is correctly computed.

An oil company during extended the estimated useful life of certain drilling equipment during the current year from 8 to 12 years. As a result, depreciation for the current year was materially lowered.

A discount outlet changed its computation for bad debt expense from 1% to of 1% of sales because of changes in its customer clientele.

A mining company sells a foreign subsidiary engaged in uranium mining, although it (the seller) continues to engage in uranium mining in other countries.

A grocery store chain changes from the average cost method to the FIFO method for inventory costing purposes.

A construction company, at great expense, prepared a major proposal for a government loan. The loan is not approved.

A manufacturer has had large losses resulting from a strike by its employees early in the year.

Depreciation for a prior period was incorrectly understated by $2,000,000. The error was discovered in the current year.

A food processor that sells wholesale to supermarket chains and to fast-food restaurants (two distinguishable classes of customers) decides to discontinue the division that sells to one of the two classes of customers.

Required:

Discuss how each of these items should be disclosed in the companys financial statements