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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?
The portfolio, which consisted of traded securities, had increased in market value by $5 million. Materiality for the audit was $10 million. What communications would you be required to make to those charged with governance?
you determine that customers owed the company $51,000 at the end of the year and no bad debts were anticipated. Also, the company owed the gas and electric company $1,100 at year-end, and the rent payment was for a two-year period. Comput accrual ..
In Moore Company's flexible budget graph, the fixed cost line and the total budgeted cost line intersect the vertical axis at $90,150. The total budgeted cost line is $392,550 at an activity level of 60,480 direct labor hours. Compute total budget..
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Determine the spending and efficiency variance for variable manufacturing overhead costs for the year.
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Prepare a brief essay that evaluates the validity, both ethically and practically, of the controller's plan.
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