Question 6 The directors of Trumpet Limited are dissopointed by the draft profit for the year ended September 30, 2017. The company's assistant has suggested two areas where she believes the reported profit may be improved. i. A major item of plant that cost $20 Million to purchase and install on Oct 1, 2014 is being depreciated on a straight line basis over a five year period. The plant is wearing well and at the beginning of the current year (Oct 1, 2016) the production manager believe the plant was likely to last eight years in total from the date of purchase. The assistant accountant has calcuated that based on the eight year life accumulated depreciation of the plant at September 30, 2017 would be 7.5M (20M/8 years*3). In the financial statements for the year ended Sptember 2016, the accumulated depreciation was $8m (20M/5 years *2 ) Therefore, by adopting an eight year life, Trumpet can avoid a depreciation charge in the current year and instead credit $0.5M ($8M-7.5M) to the income statement in the current year to improve profits. Most of Trumpet's competitors value their inventory using the average cost basis, whereas Trumpet uses FIFO basis. The value of Trumpet's inventory at September 30,2017 is $20m , however on an average cost basis it would be valued at $18M. By adopting the same method as its competitors, the assistant account says the company would improve its profit for the year by $2m. Trumpet's inventory at September 2016 was reported as $15m , however on the AVCO basis it would have been reported as $13.4 M. REQUIRED: Comment on the acceptability of the accountant's suggestions and quantify how they would affect the financial statements if they were implimented