(Change in Principle, Estimate) As a certified public accountant, you have been contacted by Joe Davison, CEO of Sports-Pro Athletics, Inc., a manufacturer of a variety of athletic equipment. He has asked you how to account for the following changes.
1. Sports-Pro appropriately changed its depreciation method for its production machinery from the double-declining-balance method to the production method effective January 1, 2012.
2. Effective January 1, 2012, Sports-Pro appropriately changed the salvage values used in computing depreciation for its office equipment.
3. On December 31, 2012, Sports-Pro appropriately changed the specific subsidiaries constituting the group of companies for which consolidated financial statements are presented.
Instructions
Write a 1–1.5 page letter to Joe Davison explaining how each of the above changes should be presented in the December 31, 2012, financial statements.