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JeromeBolandworksforSeaBiscuitCo.HeandFarahSmith,hismanager,arepreparingadjustingentriesforannualfinancialstatements.Bolandcomputesdepreciationandrecordsitas:DepreciationExpense-Equipment123000,AccumulatedDepreciation-Equipment123000. SmithagreeswithhiscomputationbutsaysthecreditentryshouldbedirectlytotheEquipmentaccount.ShearguesthatwhileaccumulateddepreciationistechnicallycorrectitislesscomplexnottouseacontraaccountandjustcredittheEquipmentaccountdirectly.Andbesidesthebalancesheetshowsthesameaccountfortotalassetsundereithermethod. How should depreciation be recorded? Do you support Boland or Smith? Evaluate the strengths and weaknesses of Smith's reasons for preferring her method.

JeromeBolandworksforSeaBiscuitCo.HeandFarahSmith,hismanager,arepreparingadjustingentriesforannualfinancialstatements.Bolandcomputesdepreciationandrecordsitas:DepreciationExpense-Equipment123000,AccumulatedDepreciation-Equipment123000.

SmithagreeswithhiscomputationbutsaysthecreditentryshouldbedirectlytotheEquipmentaccount.Shearguesthatwhileaccumulateddepreciationistechnicallycorrect"itislesscomplexnottouseacontraaccountandjustcredittheEquipmentaccountdirectly.Andbesidesthebalancesheetshowsthesameaccountfortotalassetsundereithermethod."

  1. How should depreciation be recorded? Do you support Boland or Smith?
  2. Evaluate the strengths and weaknesses of Smith's reasons for preferring her method.
  3. Indicate whether the situation Boland faces is an ethical problem. Explain.

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