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MGAB02 - 2022 Winter Group Project (Lecture 1, 2, 3, 7, 9, 30) Due Date: March 20, 2022 (11:59 pm in Quercus) Question 2: Manitoba Packaging Ltd. is a recently incorporated company that sells non-biodegradable plastic cartons. The company has just completed its first year of operations and you, the controller, are about to prepare the financial statements for that year. The president, Andy Laidlaw, instructs you to change estimates relating to a processing line of automated plastic extruding equipment, purchased for $3 million in January 2020. The equipment was originally estimated to have a useful life of five years and a residual value of $200,000. You use the straight-line method of depreciation on these assets. Andy wants the estimated useful life changed to a total of seven years and the residual value raised to $500,000 in order to reduce the annual depreciation expense. You are hesitant to make the change, believing it inappropriate to "manage" income in this way. Andy says, I'm under a lot of pressure from the shareholders to maximize net income. Don't you want your bonus, which is based on net income, to be as high as possible? Just go ahead and make the change the useful life and residual value are only an estimate, anyway." Required: 1. Who are the stakeholders in this situation? 2. Will Andy Laidlaw's proposed change increase, decrease, or not affect net income this year? 3. What impact will the proposed change in useful life and residual value have on the company's profit margin and asset turnover ratios? 4. Discuss whether the proposed change described above is unethical or simply a good business practice by an astute president