Janice Tamagi is the accountant for Thin Dime Ltd., which retails low-priced household products through over 20 retail stores across Canada. The company's year-end is December 31 and Janice is preparing the financial statements for the current year end. At this time, tension between management and staff is extremely high because a new collective agreement with the union representing most of the company's retail staff is being negotiated. Management is pleading with the union representatives to reduce their request for a salary increase, claiming that the company simply cannot afford it. Janice showed the draft financial statements with income before income tax of $2.8 million to her boss, Anna Chen, who is the corporate controller. The reported income had increased by 10% compared with the prior year. After reviewing the statements and discussing them with Janice, Anna asked her to do the following: 1. Most of the furniture owned by the company is depreciated over a 12-year life using straight-line depreciation. Depreciation expense this year was $600,000. Anna wants the useful life to be revised to 8 years, which would result in a revised depreciation expense of $900,000. Janice believes that it is possible for these assets to have a useful life of anywhere from 8 to 12 years. 2. One of the company's stores will probably be shut down next spring. The final decision to do so has not yet been made. If the store is to be shut down, severance pay for the employees who work there would be $400,000. Anna would like this amount accrued as salary expense in the current financial statements because it is highly likely to occur. 3. When Janice was preparing the financial statements, there were a few office expenses that related to December that she had not yet received the invoices for. For example, none of the stores had received their utility bills yet for the month of December. Because the financial statements had to be finalized promptly due to the negotiations with the union, Janice estimated the amounts of these bills and recorded them in December. The total amount of this accrual was $150,000. Anna felt that it was more prudent to accrue $230,000 rather than $150,000, just to be safe.