Fraud Case Case Summary: J is the manager of a fleet of utility trucks for a county government and doing the job for 30 years. He knows that the residual value of the truckis set low when they are fully depreciated , and being replaced by new trucks. He knows people in the construction business who buys these trucks at a bargain price against some kickback for him. Recently a new commissioner with a business degree is elected and he is determined to cut down on expenses. To explain: If a business recognizes gain or loss when it sells a fully depreciated asset for its residual value.
Fraud Case Case Summary: J is the manager of a fleet of utility trucks for a county government and doing the job for 30 years. He knows that the residual value of the truckis set low when they are fully depreciated , and being replaced by new trucks. He knows people in the construction business who buys these trucks at a bargain price against some kickback for him. Recently a new commissioner with a business degree is elected and he is determined to cut down on expenses. To explain: If a business recognizes gain or loss when it sells a fully depreciated asset for its residual value.
Solution Summary: The author explains that the business does not recognize any loss or gain on sale of a fully depreciated asset for its residual value.
Definition Video Definition Accounting method wherein the cost of a tangible asset is spread over the asset's useful life. Depreciation usually denotes how much of the asset's value has been used up and is usually considered an operating expense. Depreciation occurs through normal wear and tear, obsolescence, accidents, etc. Video
Chapter 9, Problem 9.1FC
1.
To determine
Fraud Case
Case Summary: J is the manager of a fleet of utility trucks for a county government and doing the job for 30 years. He knows that the residual value of the truckis set low when they are fully depreciated, and being replaced by new trucks. He knows people in the construction business who buys these trucks at a bargain price against some kickback for him. Recently a new commissioner with a business degree is elected and he is determined to cut down on expenses.
To explain: If a business recognizes gain or loss when it sells a fully depreciated asset for its residual value.
2.
To determine
To discuss: The method the business use to determine the residual values for their various assets. To ascertain if any ‘hard and fast’ rule exists for residual values.
3.
To determine
To Identify: The methods to be used to prevent the kind of fraud show cased in this situation.
Overhead application to costs is a critical issue for the costing of your products. We are studying several ways to handle this situation.
Describe overhead and the overhead application process.
What would cause an overhead to be overapplied, or underapplied.
Discuss the results to your decision making and the financial statements for each of those two situations.
Describe how the over or under application of overhead should be corrected in the accounting records.
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Chapter 9 Solutions
Horngren's Financial & Managerial Accounting, The Managerial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText -- Access Card Package (6th Edition)
Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT