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Part V: Short Analysis (6 points) Jeffrey Beam, Acme Corporation's controller, is concerned that net income may be lower this year. He is afraid upper-level
Part V: Short Analysis (6 points) Jeffrey Beam, Acme Corporation's controller, is concerned that net income may be lower this year. He is afraid upper-level management might recommend cost reductions by laying off accounting staff, including him. Beam knows that depreciation is a major expense for Acme. The company currently uses the straight-line method for financial reporting. Acme Corporation's equipment has a carrying value of $2,000,000 and a fair value of $2,180,000. Beam is thinking of increasing the estimated useful lives and the salvage values. He believes this will decrease depreciation expense. And as a result, he may be able to save his job and those of his staff. Instructions Answer the following questions: (a) Explain how a company should account for change in salvage value and useful life that is what is the accounting treatment of change in salvage value and useful life. (2 points) (b) Who are the stakeholders in this scenario (identify at least two stakeholders)? Please note, stakeholder is someone who has an interest in a given scenario. (2 points) (c) What should Beam do? (2 points)
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