changed the estimated life of its coffee brewing equipment from 7 to 4 years

Changed the estimated life of its coffee brewing

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changed the estimated life of its coffee brewing equipment from 7 to 4 years, this would be a change in estimate (Whalen, Jones, Pagach, 2017).” Lastly, changes in a reporting entity occur when a parent company acquires or sell subsidiaries creating a change to its financial reporting standards. The changes highlighted can be reported using the retrospective adjustment method or the prospective method to determine whether there should be an adjustment to previously issued financial documents or not. Taking into consideration the impact of new credit policies for Peyton Approved, we can analyze the company’s account receivable turnover. The company has a total of 7,092,495.88 in accounts receivable which represents a large amount of the company’s assets. If Peyton Approve try to recover these funds and are successful, the total amount of cash available would increase and so would its quick and current ratio and appear more appealing to investors. However, Peyton Approved will need to monitor their credit policies to ensure that the total days to collect from each account is within the company’s credit policy and enforce these rules if need be. The four-step accounting process was used by Peyton Approved to effectively correct and report errors in the revision process. This is done by analyzing the original journal entries to determine which accounts were incorrectly debited or credited and their respective amounts then determine which the posing should be correctly posted to. After which Peyton Approved will be able to determine whether the error(s) caused additional errors in other accounts and correct those entries as well. Once the company has completed all the corrections, they must transfer all adjustments to the revised balance sheet. Notes to Financial Statement Peyton Approved currently uses the straight-line depreciation method for its
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EXECUTIVE SUMMARY 9 equipment and other assets. The “straight line depreciation is the default method used to recognize the carrying amount of a fixed asset evenly over its useful life (Accounting Tools, 2018).” The company currently has $624,520 in depreciation expenses. In order to manage depreciation, Peyton Approved will continue to monitor the salvage value of all its equipment to ensure that each equipment salvage value is projected at its highest limit so that depreciation can be reduced. This can be done by paying attention to the historical estimates and data of the equipment at the current location. This information will indicate that the equipment may sell at higher cost in the future than it was previously estimated. We will also work towards restating the lifetime of assets in order to manage depreciation. For assets that are depreciated according to their estimated useful life and not based on their activity, “a company's depreciation or amortization expense can be lowered if current estimates allow a company to extend the asset's useful life over a longer period than previously established (Helstrom, 2017).”
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