Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Mr. John Trizino, Novavaxs CFO, is happy with Novavaxs 6% stock price increase today. But he is concerned that the net income of the current

Mr. John Trizino, Novavaxs CFO, is happy with Novavaxs 6% stock price increase today. But he is concerned that the net income of the current calendar year may be lower than last year because of the heavy R&D cost to develop a COVID19 vaccine. This project will be complete around March 31, 2021. He is afraid that upper-level management might recommend cost reductions by laying-off his finance staff, including him.

Mr. Trizino knows that depreciation is a major expense for Novavax. The company currently uses the double-declining balance method for both financial and tax purposes. He is thinking of selling equipment purchased when Novavax developed SARSide, a SARS vaccine in 2004. The equipment has been infrequently used for testing several medical epidemic cures. The equipment has a carrying value of $20,000,000 and a fair value of $21,800,000. The gain on the sale of the equipment would be reported in the income statement. He doesnt want to highlight this method of increasing income. He is looking for the method that requires the least extensive disclosures (i.e., the least disclosure costs) and increases net income. It may be able to save Mr. Trizinos job and his staff members.

1. Who are the stakeholders (i.e., people affected by the decision) in this situation?

2. What specific methods are available for him?

3. Try to describe the methods specifically. Your articulation will be evaluated. Which one out of the available methods would you suggest? Is it ethical? Is it economical?

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

Integrated Reporting And Audit Quality An Empirical Analysis In The European Setting

Authors: Chiara Demartini, Sara Trucco

1st Edition

3319488252, 9783319488257

More Books

Students also viewed these Accounting questions

Question

Who is present when I give in to my bad habit?

Answered: 1 week ago