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

Example of business law and ethics, Frank, a student at Anne Arundel Commun...

Frank, a student at Anne Arundel Community College, is on his way to class one day. He enjoys his class very much and is looking forward to this particular class on tort law, but d

Necessity - law of agency and partnership, Necessity - Law of Agency an...

Necessity - Law of Agency and Partnership Therefore an agency of necessity may subsist either domestic or commercial: Commercial Agency of Necessity: Although

Explain issue of non-state actors, ISSUE OF NON-STATE ACTORS The concep...

ISSUE OF NON-STATE ACTORS The concept of Non-state actor is a recent political development, which has, so far, eluded a concise definition. There are no treaties or conventions

Illustrate the example of the policy clustering, Illustrate the example of ...

Illustrate the example of the Policy Clustering Countries democratize because of political or economic pressures within their country pressures that exist simultaneously for le

Explain about the policy co-ordination of each countries, Explain in detail...

Explain in detail about the policy co-ordination of each country With no policy coordination each country will attempt to maximise its own welfare, taking the other country's m

Law for Business organisation, The concept of separate legal personality is...

The concept of separate legal personality is fundamental to company law. With close reference to leading cases, explain this concept and its relationship to the doctrine of limit

Determine the expansionary monetary policy, Determine the expansionary mone...

Determine the expansionary monetary policy The possible spillover effects associated with expansionary monetary policy. In particular with fixed exchange rates expansionary mon

Illustration of business law and ethics, Myra, another student, was very ...

Myra, another student, was very unhappy with her grade on the midterm. The following week, she arrived at the class about 20 minutes early and waited for the instructor t

What forces the policy maker to obey the law, What forces the policy maker ...

What forces the policy maker to obey the law When law directs a policy maker to carryout policy, what forces the policy maker to obey the law? When there is no restriction from

Jurisdiction over your company, a) Determine which forum(s) Purchaser could...

a) Determine which forum(s) Purchaser could file her lawsuit in.   Personal Jurisdiction, b)  If Purchaser were to file in CA, could she formed specific jurisdiction over you

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