Evaluate the balance sheet presented. State briefly the proper treatment of any item criticized.

CA5-4 ETHICS (Presentation of Property, Plant, and Equipment) Carol Keene, corporate comptroller for Dumaine Industries, is trying to decide how to present Property, plant, and equipment in the balance sheet. She realizes that the statement of cash flows will show that the company made a significant investment in purchasing new equipment this year, but overall she knows the companys plant assets are rather old. She feels that she can disclose one figure titled Property, plant, and equipment, net of depreciation, and the result will be a low figure. However, it will not disclose the age of the assets. If she chooses to show the cost less accumulated depreciation, the age of the assets will be apparent. She proposes the following.

Instructions

Answer the following questions.

1. (a) What are the ethical issues involved?

2. (b) What should Keene do?

Property, plant, and equipment, net of depreciation rather than Property, plant, and equipment Less: Accumulated depreciatiorn Net book value $10,000,000 $50,000,000 40,000,000 $10,000,000