answer each of the following questions in their entirety. When completed upload your work for grading stions 1. Assume that at least some rewards for the management team (and, hence, also other employees are based on performance measured in terms of accounting income and returns on net assets. Also assume that all of these airlines are growing, that is, they are adding to their fleet size. What are the behavioral implications of each of the following three depreciation-related accounting policy choices: (1) depreciation patterns (i.e., straight-line vs. accelerated): (2) estimated useful lives; and (3) residual values? Consider, at a minimum, the effects of each of these choices on decisions regarding a. Replacement of aircraft in service, b. Pricing, assuming that prices are at least somewhat dependent on costs: c. Evaluations of routes or lines of business d. Evaluations of managers, assuming that negotiated budgets provide the primary standard of performance 50% 2. Assume that in a particular US airline company, there is conflict between the benefits of conservatism vs liberalism in depreciation accounting That is, for this company conservatism in depreciation accounting is greatly preferred for financial reporting purposes (for whatever reason) but for internal purposes, the company would be better off if the policies were more liberal, or vice versa Would you recommend to the managers of this company that they adopt a third set of books That is should they maintain one set of books for financial accounting purposes, another set for tax purposes, and a third set for the purposes of running the business? Explain 20% 3. If the managers of a particular airline do not want to maintain a third set of books, should they tend to be conservative or liberal in their aircraft depreciation accounting? Explain. 30% ASSIGNMENT SUBMISSION Text Submission Write Submission Attach Files Browse My Computer Browse Content Collection Browse Cloud Storage answer each of the following questions in their entirety. When completed upload your work for grading stions 1. Assume that at least some rewards for the management team (and, hence, also other employees are based on performance measured in terms of accounting income and returns on net assets. Also assume that all of these airlines are growing, that is, they are adding to their fleet size. What are the behavioral implications of each of the following three depreciation-related accounting policy choices: (1) depreciation patterns (i.e., straight-line vs. accelerated): (2) estimated useful lives; and (3) residual values? Consider, at a minimum, the effects of each of these choices on decisions regarding a. Replacement of aircraft in service, b. Pricing, assuming that prices are at least somewhat dependent on costs: c. Evaluations of routes or lines of business d. Evaluations of managers, assuming that negotiated budgets provide the primary standard of performance 50% 2. Assume that in a particular US airline company, there is conflict between the benefits of conservatism vs liberalism in depreciation accounting That is, for this company conservatism in depreciation accounting is greatly preferred for financial reporting purposes (for whatever reason) but for internal purposes, the company would be better off if the policies were more liberal, or vice versa Would you recommend to the managers of this company that they adopt a third set of books That is should they maintain one set of books for financial accounting purposes, another set for tax purposes, and a third set for the purposes of running the business? Explain 20% 3. If the managers of a particular airline do not want to maintain a third set of books, should they tend to be conservative or liberal in their aircraft depreciation accounting? Explain. 30% ASSIGNMENT SUBMISSION Text Submission Write Submission Attach Files Browse My Computer Browse Content Collection Browse Cloud Storage
