DuntinG ChERgOS Independent situations LO20-1g through LO20-50 Sometimes a business entity will change its method of aceounting for eertain items. The change may be clasified au in accounting principle, a change in accounting estim te, or B ehange in reporting entity. Listed below are three independent, unrelated sets of facts relating to accounting changes. Situation I: A company determined that the depreciable lives of its fixed assets are presently to long to fairly match the cost of the fixed assets with the revenue produced. The company decided at the beginning of the reduee the depreciable lives of all of its existing fixed assets by five years. current year to Situation 11: On December 31, 2017, Gary Company owned 51% of Allen Company, at which time Gary reported its investment on a nonconsolidated basis due to political uncertainties in the country in which Allen was located. On January 2, 2018, the management of Gary Company was satisfied that the political uncertainties were resolved and the assets of the company were in no danger of nationalization. Aeeordingly, Gary will prepare consolidated financial statements for Gary and Allen for the yenr ended December 31, 2018. Situation l 1: A company decides in January 2018 to adopt the stright-line method of depreciation for plant equipment. The straight-line method will be used for new acquisitions as well as for previously aequired plant equipment, for which depreciation had been provided on an neeelernted basis. Required Required: For each of the situations deseribed above, provide the information indieated below. Complete your discussion of each situation before going on to the next situation. 1. Type of accounting change 2. Manner of reporting the change under current generally accepted accounting principles, including a discussion, where applicable, of how amounts are computed 3. Effeet of the change on the balane sheet and income statemsent 4. Footnote diselosures that would be necessary Judgment Case 20-11 Inventory errors LO20-69