Mickey Gillespie is the controller of Print Technologies, a publicly owned company. The company is experiencing financial
Question:
Mickey Gillespie is the controller of Print Technologies, a publicly owned company. The company is experiencing financial difficulties and is aggressively looking for ways to cut costs.
Suzanne Bedell, the CEO, instructs Gillespie to lengthen from 5 to 10 years the useful life used in computing depreciation on certain special-purpose machinery. Bedell believes that this change represents a substantial cost savings, as it will reduce the depreciation expense on these assets by nearly one-half.
Instructions
a. Discuss the extent to which Bedell’s idea will, in fact, achieve a cost savings. Consider the effects on both net income and cash flows.
b. Who is responsible for estimating the useful lives of plant assets?
c. Discuss any ethical issues that Gillespie should consider with respect to Bedell’s instructions.
Step by Step Answer:
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello