Ch 10 ED - expense is being thinned and stretched over...

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Ethical Dilemma The president has asked you to change depreciation in a very unreal fashion. Switching to the straight-line method would help in the short run, as it would take care of the accelerated depreciation hitting the assets. Extending the useful life can be done as long as the asset is going to be used for twenty years. However, since it is a computer which is updated on a monthly basis and is currently only five years of EUL, this number is unfit. Net income would increase by doing this, however, because the depreciation
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Unformatted text preview: expense is being thinned and stretched over twenty periods instead of five. Increasing the residual value can be increased if you can receive that much from “scrapping” the asset. Increasing the residual value by 20%, however, is highly unlikely. This also would increase net income as the depreciation would not be as high with an increased residual value. The last two conditions the president gives you cannot be done if you adhere to the GAAP, so as the accountant, I would not change the policies....
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