Chapter 12, Problem 5CTC

a.

To determine

Describe the reason as to why the assets that are in operation would be written down.

b.

To determine

Explain whether the classification of the losses on written down value of assets should be reported as unusual or infrequent items on the income statement.

c.

To determine

Describe the effect of losses from unusual or infrequent items on the price-earnings ratio.

d.

To determine

Discuss the ethical dilemma in the given case, and discuss how these losses would affect the management’s compensation.

e.

To determine

Discuss the way in which the written down values effect the future earnings.