Reference no: EM133373280

Question: Two years ago, on March 1, 2018. General Recycling Management Systems purchased five used trucks and debited the Trucks account for the total cost of $180,000. The estimated useful life and residual value per truck were determined to be five years and $5,000, respectively. $36,000 was paid for a two-year insurance policy covering the trucks effective March 1, 2018; this amount was also debited to the Trucks account since it related to the trucks. On February 1. 2019, new motors were installed in the trucks: parts cost $33,000, and labour was $7.000. New tires were also installed on this date at a total cost of $32,000, and each truck was given an oil change in addition to some minor brake work; the total cost was $2,500. All of these costs were debited to the Trucks account. Profit for the years ended December 31, 2019, and 2020 were $78,000 and $85,000. The manager of the business was paid a bonus equal to 15% of profit; the 2019 bonus was paid on February 1, 2020, and recorded on that date as a debit to Bonus Expense and credit to Cash; the 2020 amount was paid on February 1, 2021, and recorded on that date as a debit to Bonus Expense and credit to Cash. Required Using the elements of critical thinking, comment on whether all of these items should have been recorded to the truck account. What would the impact be to profit if some of the items were recorded as expense? And, what would the difference be to the manager's bonus paid? What are your thoughts on the ethics involved in this situation?