Explain ethics & financial reporting , Business Law and Ethics

Assignment Help:

Pat Clark is the controller for Best Pharma, a publicly-held pharmaceuticals manufacturer in Wilmington, Delaware.  In early December 2011, Pat's boss, CEO Bernie Skilling, approached her with the following news:  "I've come up with an idea for improving our results for this year.  My golfing buddy is the CEO of Wright Drugs.  His company owns the identical chemical analysis machine which we purchased last year.  He is willing to exchange his machine for ours, and since the fair value of our machine is as high as it is, we should be able to book a significant gain on the exchange.  I want you to prepare an analysis of how much we will be able to record and how the transaction will affect our financial statements.  Remember, we need this deal to improve our pretax income by at least $500,000."

The chemical analysis machine to which Bernie referred had just recently been invented and was purchased by Best Pharma at the beginning of 2010.  The machine was in great demand as soon as it was marketed, but recently many companies have not been able to acquire this model due to long production backlogs and the manufacturer's involvement in a patent dispute with its inventor.  As a result, the resale value of this model has skyrocketed, approaching the amount Best Pharma originally paid for the machine in some cases. 

            After Bernie left, Pat gathered the following information:

            For Best Pharma's machine:

                        Historical cost                                                              1,750,000

                        Accumulated depreciation (as of the date of the

proposed exchange in Dec. 2009)         (725,000)

                        Fair value                                                                     1,650,000

(Note: Wright Drugs machine is the exact model in the same condition, so fair value of its machine is identical to Best Pharma's machine.)

Required:

a.) Based on Pat's information above, what journal entry (or entries), if any, should Pat propose regarding the exchange with Wright Drugs?  Explain your answer. 

b.) Regardless of your answer in part a, if Pat were to conclude that recording a gain of at least $500,000 is not appropriate for this exchange, what course of action should she take?  Should she still record the gain according to Bernie's request? Explain.


Related Discussions:- Explain ethics & financial reporting

The international court of justice, The International Court of Justice ...

The International Court of Justice The International Court of Justice (ICJ) issued a legal opinion on the legality of nuclear weapons, which says that the threat or use of forc

Technique of reference to arbitration, Technique of Reference to Arbitratio...

Technique of Reference to Arbitration Whereas a dispute may be referred to arbitration through like as; The parties in accordance by the agreement and The court wh

Who are the stakeholders, Jordan is the director a big engineering Company....

Jordan is the director a big engineering Company. Tyson is the Chief Engineer of the company. He is working on the company's new project, namely the construction of a new building

Sources of us law of contract, Sources of US Law of Contract However t...

Sources of US Law of Contract However the Law of Contract Act 1961, S. 2(2) provides like, except as may be provided through any written law to the time being in force, hence

Article 2 - state responsibility, Article 2 - State Responsibility Art...

Article 2 - State Responsibility Article 2 . This article lists down the elements of what constitute International wrongful act of a state. Means both wrongful acts and omissi

Money lent - effect of ultra vires transaction, Money Lent: According ...

Money Lent: According to the decision in Re: David Payne & Co Ltd (23), a person lending money to a company is not bound to enquire as to why the company requires the money. H

Government optimal long run policy - nash equilibrium, Government optimal l...

Government optimal long run policy - Nash equilibrium The government's optimal long run policy is associated with policy coordination at point C. However, as in the static mod

Difference between plain meaning and the liberal approaches, What is the d...

What is the difference between the plain meaning and the liberal approaches to the interpretation of contracts? Provide me with an example of each to show me you understand the dif

Discuss legal relationship between a bank and its customer, Question 1: ...

Question 1: Discuss the legal relationship between a bank and its customer with reference to the responsibilities of the parties towards each other. Question 2: This qu

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd