Chapter 14, Problem 43P

The following environmental cost reports for 20x3, 20x4, and 20x5 (year end December 31) are for the Communications Products Division of Kartel, a telecommunications company. In 2011, Kartel committed itself to a continuous environmental improvement program, which was implemented throughout the company.

At the beginning of 20x5, Kartel began a new program of recycling nonhazardous scrap. The effort produced recycling income totaling $25,000. The marketing vice president and the environmental manager estimated that sales revenue had increased by $200,000 per year since 20x3 because of an improved public image relative to environmental performance. The company’s Finance Department also estimated that Kartel saved $80,000 in 20x5 because of reduced finance and insurance costs, all attributable to improved environmental performance. All reductions in environmental costs from 20x3 to 20x5 are attributable to improvement efforts. Furthermore, any reductions represent ongoing savings.

Required:

1. 1. Prepare an environmental financial statement for 20x5 (for the Products Division). In the cost section, classify environmental costs by category (prevention, detection, etc.).
2. 2. Evaluate the changes in environmental performance.