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Phil Prior, Broderick Corporation’s controller is concerned that net income may be lower this year. He is afraid upper-level management might recommend cost reductions by laying off accounting staff, including him. Prior knows that depreciation is a major expense for Broderick. The company currently uses the double declining-balance method for both financial reporting and tax purposes, and he’s thinking of selling equipment that, given its age, is primarily used when there are periodic spikes in demand. The equipment has a carrying value of $2,000,000 and a fair value of $2,180,000. The gain on the sale would be reported in the income statement. He doesn’t want to highlight this method of increasing income. He thinks, “Why don’t I increase the estimated useful lives and the salvage values? That will decrease depreciation expense and require less extensive disclosure, since the changes are accounted for prospectively. I may be able to save my job and those of my staff.” Answer the following questions. (a) Who are the stakeholders in this situation? Explain. (b) What are the ethical issues involved? (c) If you were Prior, what would you do?
Explain why the book and fair values of the goodwill of Elson Corporation are different. Discuss the propriety of (a) increasing the stated value of goodwill prior to the negotiations and (b) eliminating goodwill completely from the balance sheet p..
At December 31, 2014, Indigo Girls Company has outstanding noncancelable purchase commitments for 36,000 gallons, at $3.00 per gallon, of raw material to be used in its manufacturing process. Assuming that the market price as of December 31, 2014, is..
Calculate the company's overall return on investment (ROI). Also, calculate the com- pany's overall economic value added amount. (Assume a weighted-average cost of capital of 10%.
McKeon Machine Company has outstanding a $210,000 note payable to Tejon Investment Corporation. Because of financial difficulties, McKeon negotiates with Tejon to exchange inventory of machine parts to satisfy the debt. Prepare the journal entry for ..
he will receive annual payments of $53,000 for the next 10 years. How much must he deposit if the interest rate is 8% compounded quarterly?
Prepare the entries on Paltrow Co.'s books related to the transactions that occurred on January 10, February 12, and March 1.
Boston's Dairy has just opened its main yogurt factory in upstate Massachusetts. The main factory can produce 3,500 boxes of yogurt monthly (each box contains 12 6oz cups), Due to overwhelming demand for the company's product, Boston's Dairy has sign..
Make a flexible budget for the Beverage Division using production levels of 45,000 units, 50,000 units, and 55,000 units. If required, round per unit amounts to two decimal places
What is the maximum amount of income that Capitech should report from this investment for 2011?
What are the company's depreciation methods? What is the range of estimated useful lives used for depreciating its assets? Does the company use the same depreciation methods for financial statements and tax returns? If not, please describe the method..
The income tax rate for that year was 26%. Bodily had an unused $110,000 net operating loss carryforward from 2009 when the tax rate was 33%. Bodily's income tax payable for 2011 would be?
During the same year, cash was paid out to purchase inventory for $ 335,000, to employees for $ 230,000, and for the purchase of plant assets of $ 190,000. Calculate amount of cash provided by or used for operating activities by the direct method.
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