Reference no: EM13575550

Finney Container Company is suffering declining sales of its principal product, non-biodegradable plastic cartons. The president, Philip Shapeero, instructs his controller, Sharon Fetters, to lengthen asset lives to reduce depreciation expense. A processing line of automated plastic extruding equipment, purchased for $2.7 million in January 2002, was originally estimated to have a useful life of 8 years and a salvage value of $300,000. Depreciation has been recorded for 2 years on that basis. Philip wants the estimated life changed to 12 years total, and the straight-line method continued. Sharon is hesitant to make the change, believing it is unethical to increase net income in this manner. Philip says, "Hey, the life is only an estimate, and I've heard that our competition used a 12-year life on their production equipment."

Is the change in asset life unethical, or is it simply a good business practice by an astute president? What would you do if you were the controller?