Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Bricker Graphics is a privately held company specializing in package labels. Representatives of the firm have just returned from Switzerland, where a Swiss firm is

Bricker Graphics is a privately held company specializing in package labels. Representatives of the firm have just returned from Switzerland, where a Swiss firm is manufacturing a custom-made high speed, color labeling machine. Confidence is high that the new machine will help rescue Bricker from sharply declining profitability. Bricker's chief operating officer, Don Benson , has been under fire for not reaching the company's performance goals of achieving a rate of return on assets of at least 12%. The afternoon of his return from Switzerland, Benson called Susan Sharp into his office. Susan is Bricker's Controller. Benson: I wish you had been able to go. We have some accounting issues to conside Sharp: I wish I 'd been there, too. I understand the food was marvelous. What are the accounting issues? Benson: They discussed accepting our notes at the going rate for a face amount of $12.5 million. We also discussed financing with stock. Sharp: I thought we agreed; debt is the way to go for us now. Benson: Yes, but I've been thinking. We can issue shares for a total of $10 million. The labeler is custom made and doesn't have a quoted selling price, but the domestic labelers we considered went for around $ 10 million. It sure would help our rate of return if we keep the asset base as low as possible.

Required:

I . How will Benson' s plan affect the return measure? What accounting issue is involved?

2. ls the proposal ethical?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles Of Auditing An Introduction To International Standards On Auditing

Authors: Rick Stephan Hayes, Roger Dassen, Arnold Schilder, Philip Wallage

2nd Edition

0273684108, 978-0273684107

More Books

Students also viewed these Accounting questions

Question

a. Did you express your anger verbally? Physically?

Answered: 1 week ago