Need situation 3 done

Case 6-7 Identifying Accounting Changes Sometimes a business entity changes its method of accounting Situation 3 A company decides in January 2020 to adopt the for certain items. The change may be classified as a change straight-line method of depreciation for plant equipment. This in accounting principle, a change in accounting estimate, or method will be used for new acquisitions as well as for pre- a change in reporting entity. Following are three independent, viously acquired plant equipment for which depreciation had unrelated sets of facts relating to accounting changes. been provided on an accelerated basis. Situation / A company determined that the depreciable Required: lives of its fixed assets were currently too long to fairly match the cost of the fixed assets with the revenue produced. The For each of the preceding situations, provide the following company decided at the beginning of the current year to reduce information. Complete your discussion of each situation before the depreciable lives of all its existing fixed assets by five years. going on to the next situation. Situation 2 On December 31, 2019, Gary Company owned a. Type of accounting change 51% of Allen Company, at which time Gary reported its b. Manner of reporting the change under current US GAAP, investment using the cost method owing to political uncer- including a discussion, where applicable, of how amounts tainties in the country in which Allen was located on Janu- are computed ary 2, 2020, the management of Gary Company was satisfied c Effects of the change on the statement of financial position that the political uncertainties were resolved and that the assets and earnings statement of the company were in no danger of nationalization. Accord d. Required disclosures ingly, Gary will prepare consolidated financial statements for Gary and Allen for the year ended December 31, 2020