Case 6-8
Morgan Company grows various crops and then processes them forsale to retailers. Morgan has changed its depreciation method forits processing equipment from the double-declining-balance methodto the straight-line method effective January 1 of this year.
In the latter part of this year, a large portion of Morganâscrops were destroyed by a hailstorm. Morgan has incurredsubstantial costs in raising the crops that were destroyed. Severedamage is rare in the locality where the crops are grown.
Required:
A) How should Morgan calculate and report the effect(s) of thechange in depreciation method in this yearâs income statement?
B) where should Morgan report the effects of the hailstorm inits income statement? Why?
C) how does the classification in the incoem statement of anextraordinary item differ from that of an operating item? Why?
Case 6-8
Morgan Company grows various crops and then processes them forsale to retailers. Morgan has changed its depreciation method forits processing equipment from the double-declining-balance methodto the straight-line method effective January 1 of this year.
In the latter part of this year, a large portion of Morganâscrops were destroyed by a hailstorm. Morgan has incurredsubstantial costs in raising the crops that were destroyed. Severedamage is rare in the locality where the crops are grown.
Required:
A) How should Morgan calculate and report the effect(s) of thechange in depreciation method in this yearâs income statement?
B) where should Morgan report the effects of the hailstorm inits income statement? Why?
C) how does the classification in the incoem statement of anextraordinary item differ from that of an operating item? Why?
