The ceo does not like heathers conclusion because of

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The CEO does not like Heather’s conclusion because of the effect it would have on 2013 income. “Looks like a simple revision in service life from 10 years to 5 years to me,” Dent concluded. “Let’s go with it that way, Heather.” Required: 1. What is the difference in before-tax income between the CEO’s and Heather’s treatment of the situation? 2. Discuss Heather Meyer’s ethical dilemma. Answer:
Requirement 1 2013 expense using CEO's approach: $42,000,000 Cost $4,200,000 Previous annual depreciation ($42,000,000 ÷ 10 years) x 2 years 8 ,400,000 Depreciation to date (2011–2012) 33,600,000 Book value ÷ 3 Estimated remaining life (2013–2015) $11,200,000 New annual depreciation 2013 income would include only depreciation expense of $11,200,000. 2013 expense using Heather's approach: $42,000,000 Cost $4,200,000 Previous annual depreciation ($42,000,000 ÷ 10 years) x 2 years 8 ,400,000 Depreciation to date (2011–2012)
33,600,000 Book value 12 ,900,000 Write-down 20,700,000 New depreciable base ÷ 3 Estimated remaining life (2013–2015) $ 6,900,000 New annual depreciation 2013 income would include depreciation expense of $6,900,000 and an asset write-down of $12,900,000 for a total income reduction of $19,800,000. Using Heather's approach, 2013's before tax income would be lower by $8,600,000 ($19,800,000 – 11,200,000). Requirement 2 Discussion should include these elements.

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