At the beginning of 2009 the healthy life food company

Reference no: EM13480473

At the beginning of 2009, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10-year service life and no residual value. The straight-line depreciation method was used to measure depreciation for 2009 and 2010. Late in 2011, it became apparent that sales of the new frozen food line were significantly below expectations. The company decided to continue production for two more years (2012 and 2013) and then discontinue the line. At that time, the equipment will be sold for minimal scrap values.

The controller, Heather Meyer, was asked by Harvey Dent, the company's chief executive officer (CEO), to determine the appropriate treatment of the change in service life of the equipment. Heather determined that there has been an impairment of value requiring an immediate write-down of the equipment of $12,900,000. The remaining book value would then be depreciated over the equipment's revised service life. The CEO does not like Heather's conclusion because of the effect it would have on 2011 income. "Looks like a simple revision in service life from 10 years to 5 years to me," Dent concluded. "Let's go with it that way, Heather." What is the difference in before-tax income between the CEO's and Heather's treatment of the situation? Discuss Heather Meyer's ethical dilemma. Do you agree with the ethical perspectives of your classmates? What implications could this have on future Healthy Life Food Company dealings?

Reference no: EM13480473

Questions Cloud

Compare the absolute amount of change with the percent : compare the absolute amount of change with the percent change as an indicator of change. which is better for

As you examined this week netflix and its competitors have : as you examined this week netflix and its competitors have faced interesting decisions regarding product offerings and

If the company financed the project entirely with equity : gemini inc. an all-equity firm is considering a 1.9 million investment that will be depreciated according to the

Explain the usefulness of comparative financial statement : comparative analysis is an important tool in financial analysis.a. explain the usefulness of comparative financial

At the beginning of 2009 the healthy life food company : at the beginning of 2009 the healthy life food company purchased equipment for 42 million to be used in the manufacture

Ineed a single page summary on the finacial times article : i need a single page summary on the finacial times article us-export-import bank faces fresh battle for survival. by

Microsoft corporation reports its investments : microsoft corporation reports its investments available-for-sale at the fair value of the investment securities. the

Over the last 12 months natural disasters have occurred in : 1.over the last 12 months natural disasters have occurred in australia new zealand and japan. explain how you would

Identify at least seven additional sources of financial : identify at least seven additional sources of financial reporting information beyond financial statements that are

User Account

All Pages