Accouting, financial statement

You, as auditor, are having a discussion with the controller of Aqueduct Corp. concerning two events that affect the 2014 Income Statement. The two events are as follows:

(1) The company disposed of one its production facilities during 2014. This production facility accounted for over 25% of Aqueduct’s total production of the product it sells. The sale of the facility resulted in an $850,000 loss before tax. The controller believes this loss should be reported on the income statement as a discontinued operation.

(2) The company switched from straight-line to double-declining balance depreciation during the year. Double-declining balance more accurately reflects the consumption of the assets. The controller believes the cumulative effect of this change should be shown as an adjustment to the beginning retained earnings balance in the statement of stockholder’s equity.

Fully explain why you agree or disagree and, if you disagree, explain the proper presentation. Cite your authoritative support from the Accounting Standards Codification.