Ethics and depreciation Issues you are auditing the financial records of a company and are reviewing the depreciation computations.Included in the assets are two buildning and numerous machine in each building.One of the building is used to, amnufacture components of toys and the other for assembly and packing,using the manufactured componenets as well as others purchased from suppliers.You see that the company uses straight-line depreciation over 40 years for the buildings and 20 years for the machinaery.You decide to ask the CFO about these calculatons,and he replies,"we use 40 years for the buildings because it is close to the 39 we use for tax.And our best guess is that we will replace the machines twice while we use the building.And the method is easy to use and most comapnies use it,don't they?Or have things changed that much since I was in college?" you feel as if you have annoyed the CFO with ypur questions,so you decide to leave.As you back to your office,you recall from earlier in the audit that the co pany uses FIFO and LIFO for different segments of its inventory and that all top-level managers receive bonuses on reported income. Required: From financial reporting and ethical perspectives,what depreciation method and lives would you recommend?
Ethics and
you are auditing the financial records of a company and are reviewing the depreciation computations.Included in the assets are two buildning and numerous machine in each building.One of the building is used to, amnufacture components of toys and the other for assembly and packing,using the manufactured componenets as well as others purchased from suppliers.You see that the company uses straight-line depreciation over 40 years for the buildings and 20 years for the machinaery.You decide to ask the CFO about these calculatons,and he replies,"we use 40 years for the buildings because it is close to the 39 we use for tax.And our best guess is that we will replace the machines twice while we use the building.And the method is easy to use and most comapnies use it,don't they?Or have things changed that much since I was in college?" you feel as if you have annoyed the CFO with ypur questions,so you decide to leave.As you back to your office,you recall from earlier in the audit that the co pany uses FIFO and LIFO for different segments of its inventory and that all top-level managers receive bonuses on reported income.
Required:
From financial reporting and ethical perspectives,what depreciation method and lives would you recommend?
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