Ray Solutions decided to make the following changes in its accounting policies o

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Ray Solutions decided to make the following changes in its accounting policies on January 1, 2018: – Changed from the cash to the accrual basis of accounting for recognizing revenue on its service contracts. – Adopted straight-line depreciation for all future equipment purchases, but continued to use accelerated depreciation for all equipment acquired before 2018. – Changed from the LIFO inventory method to the FIFO inventory method. Required: For each accounting change Ray undertook, indicate the type of change and how Ray should report the change. Be specific. Required: – Why will bonuses be negatively affected? What is the effect on pretax earnings? – If the error is not corrected in the current year and is discovered by the auditors during the following year’s audit, how will the error be reported in the company’s financial statements? – Discuss the ethical dilemma Howard faces.

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