Prior period adjustment in comparative statements

Page 1of 1Bus 205:Intermediate Accounting I–You work as an accountant for regional CPA firm of Cash and Green. Your supervisor asked you to conduct research for three unrelated clients.1.Hester Companyis planning this year to present comparative income statements but only the current year’s balance sheet. Devin, president of Hester Companyrequests your advice as to whether comparative cash flow statements for both the current and prior periods are necessary considering only the current year’s balance sheet is presented. Are there any authoritative pronouncements that address this issue that you could present to Devin?2.After the M. ForteCompany issued its previous years’ financial statements, it noticed that it incorrectly calculated depreciation expense and, thus, disclosed this fact as a prior period adjustment in its current years’ financial statements. (This difference also did not affect any cash balances, since M. Fortemaintained an operating loss for both periods.) However, M. Fortedid not issue comparative financial statements in the current year. M. Fortenow wonders how to disclose this prior period adjustment in its currentyear’s Statement of Cash Flows.3.A new client for your firm is G. Sayerswho is preparing personal financial statements for a bank loan. Mr. Sayersis attempting to list his social security benefits to be received based on his future life expectancyas an asset on his financial statements. Mr. Sayers states that such benefits meet the definition of an asset. Would you agree to allow the social security benefits to be listed as an asset?Required:a)Provide responses for each independent case on the appropriate accounting treatment.b)Support your responses with code sections from the FASB Accounting Standards Codification (ASC).