Do you agree with ethical perspectives of your classmates

Assignment Help Financial Accounting

Reference no: EM131211269

At the beginning of 2011, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10-year service life and no residual value. The straight-line depreciation method was used to measure depreciation for 2011 and 2012. Late in 2013, it became apparent that sales of the new frozen food line were significantly below expectations. The company decided to continue production for two more years (2014 and 2015) and then discontinue the line. At that time, the equipment will be sold for minimal scrap values. The controller, Heather Meyer, was asked by Harvey Dent, the company's chief executive officer (CEO), to determine the appropriate treatment of the change in service life of the equipment. Heather determined that there has been an impairment of value requiring an immediate write-down of the equipment of $12,900,000. The remaining book value would then be depreciated over the equipment's revised service life. The CEO does not like Heather's conclusion because of the effect it would have on 2013 income. “Looks like a simple revision in service life from 10 years to 5 years to me,” Dent concluded. “Let's go with it that way, Heather.” What is the difference in before-tax income between the CEO's and Heather's treatment of the situation? Discuss Heather Meyer's ethical dilemma. Do you agree with the ethical perspectives of your classmates? What implications could this have on future Healthy Life Food Company dealings?

Reference no: EM131211269

Questions Cloud

Financial statements are presented fairly : Most auditors believe that financial statements are "presented fairly" when the statements are in accordance with GAAP, and that it is also necessary to: Determine that they are not in violation of FASB statements. Examine the substance of transactio..

Determine the cost of direct materials used in production : Cost of Direct Materials Used in Production for a Manufacturing Company. Determine the cost of direct materials used in production by Rextacular during the month ended June 30, 2016.

Calculate company direct labor rate and efficiency variances : At the beginning of last year, creative productions set direct labor standards of 2 hours at $25 per hour for each product produced. during the year, 1,700 direct labor hours were actually worked at an average cost of $26 per hour. using this informa..

Prepare a flexible budget : Prepare a flexible budget for 20,000, 22,000, and 24,000 units of output, using the information that follows. Variable costs: Direct materials $1.00 per unit Direct labor $4.00 per unit Variable overhead $8.00 per unit Total budgeted fixed overhead $..

Do you agree with ethical perspectives of your classmates : At the beginning of 2011, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10-year service life and no residual value. Do you ..

Cost-volume-profit analysis improve understanding : How does Cost-Volume-Profit (CVP) analysis improve understanding and comparisons when using the contribution margin to determine a company'sbreakeven point for a single product or multiple products?

Determined after negotiations with internal revenue service : Madrasah Corporation issued its financial statements for the year ended December 31, 2014, on March 10, 2015. The following events took place early in 2015. On March 1, Madrasah determined after negotiations with the Internal Revenue Service that inc..

Compute the taxes owed after selling this equipment : A piece of equipment is bought for $70,000 and is depreciate, with a salvage value of $2,000. At the end of 5 years the equipment was sold for $35,000. If the company is in the 36% tax bracket, compute the taxes owed after selling this equipment in y..

What is the direct materials efficiency? variance : Farewell Boating Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Allen uses standard costs to prepare its flexible budget. What is the direct materials efficiency? variance?

User Account

All Pages