and of the building $176,000. However, management told the accounting department to record the land at $193,600 and the building at $70,400. The building is being depreciated on a straight-line basis over 15 years with no salvage value. Calculate the annual change in net income Why do you suppose management requested this accounting treatment? Is it ethical? It is likely that management requested this accounting treatment and this practice is

and of the building $176,000. However, management told the accounting department to record the land at $193,600 and the building at $70,400. The building is being depreciated on a straight-line basis over 15 years with no salvage value. Calculate the annual change in net income Why do you suppose management requested this accounting treatment? Is it ethical? It is likely that management requested this accounting treatment and this practice is

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Mickey Gillespie is the controller of Print Technologies, a publicly owned company. The companyis experiencing financial difficulties and is aggressively looking for ways to cut costs.Suzanne Bedell, the CEO, instructs Gillespie to lengthen from 5 to 10 years the useful life usedin computing depreciation on certain special-purpose machinery. Bedell believes that this changerepresents a substantial cost savings, as it will reduce the depreciation expense on these assets bynearly one-half. Note: The proposed change affects only the depreciation expense recognized in financial state-ments. Depreciation deductions in income tax returns will not be affected. Instructionsa. Discuss the extent to which Bedell’s idea will, in fact, achieve a cost savings. Consider theeffects on both net income and cash flows.b. Who is responsible for estimating the useful lives of plant assets?c. Discuss any ethical issues that Gillespie should consider with respect to Bedell’s instructions.
A large profitable corporation bought a small jet plane for use by the firm's executives in January. The plane cost $1.5 Million and, for depreciation purposes, is assumed to have a zero salvage value at the end of five years. Compute the MACRS depreciation schedule.
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Assume that you are the accountant for Computer Consultants. Prior to this year, Computer Consultants operated out of a leased office. However, the company purchased its own office building this year. The building is in an area where real estate values have been increasing an average of 6 percent per year. The owner of Computer Consultants has asked why you recorded depreciation on the building if real estate values are appreciating. Write a response to the owner explaining why depreciation must be recorded on the company’s accounting records.
AT & T company was depreciating its antennas over 20 years. The total cost of the antennas accounted for 20 million dollars. It was recently discovered that the antennas useful life is only seven years due to new technological development. With reference to the above scenario answer the following questions. What is the accounting implication in this situation and why? What promulgated Accounting Standards should be followed? Provide rationale. How and why should this discovery be recorded in the financial statements of the company? If the company issues quarterly financial statements and the discovery is made in the third quarter, should this impact be shown prospectively or retroactively and in what specific time period? As the accountant, what could you recommend to management and why?
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You are an accountant at a large research university. The controller is considering switching its accounting policy so that it is in line with other universities. The current policy requires all assets be depreciated on a straight-line basis with no salvage value and a full year of depreciation taken in the year of acquisition regardless of the acquisition date. The proposed policy would require all asset depreciated on a straight-line basis with no salvage value and depreciation taken based on the nearest full month from the acquisition date. The data provided shows all assets that are in use even though some assets have already been fully depreciated. The controller has provided a dashboard visualization that shows the differences between the two depreciation policies for the period ending December 31, 2018 and asks you to answer the questions below. Click here to view the data in Tableau, and here to view it in Power BI. (The Tableau and Power BI files contain the same data; you can…
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35. Management has recently purchased new equipment but is uncertain about its useful life. For the initial year, management estimated a useful life of 10 years. However, due to a major accident during the first year, management is now uncertain about the equipment's functionality and has revised its estimate to 5 years and included a description of their uncertainty and of this change in estimated useful life in financial statement disclosures. Which of the following is an accurate statement regarding this approach? A) Information contains error because management changed its estimates on the useful life of the equipment. B) Information contains error because the useful life of the equipment is uncertain. C) Information is free from error because management has provided enough disclosure regarding the uncertain estimate. D) Information is free from error because management made the correct decision in revising the estimated useful life of the equipment.
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A few years ago, Largo Industries implemented an inventory auditing system at an installed cost of $176,000. Since then, it has taken depreciation deductions totaling $124,960. What is the system's current book value? If Largo sold the system for $111,000, how much recaptured depreciation would result?