Upper-level management might recommend cost reductions

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Reference no: EM131119658

Jordan Baker is the Senior Accountant for Archer Manufacturing and is concerned that the company’s net income may be lower than expected this year. If it is, he is afraid that upper-level management might recommend cost reductions by reducing the number of accounting staff, including him. To help increase net income, Baker considered selling some equipment that, given its age, is primarily used when there are periodic spikes in demand. This would lower annual depreciation expense and generate a “gain on sale” line item on the income statement. However, Baker didn’t want to highlight this method of attempting to increase income, so he needed another solution. Instead of the equipment sale, he is considering increasing the estimated useful lives and salvages values of all of the company’s equipment. That will decrease annual depreciation expense and require less extensive disclosure, since the changes are accounted for currently and prospectively. He knows that if he can increase net income to the expected level, he may be able to save his job and those of his staff. 1. Who are the stakeholders in this situation? List at least two. 2. What are the ethical issues involved? List at least two. 3. What do you think Baker should do?

Reference no: EM131119658

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