11-23-2009, 12:51 AM
1. Straight line depreciation = (35000-7000)/4 = $7,000
Units of production= (35000-7000)*(4000/28000) = $4000
double declining method (35000)(2/4) = $17,500
2. The units of production method would achieve the owners objective. The company wants the assets to be at least $250,000. Using the units of production method would give them current assets of $251,000.
3. it i snot ethical because company is not using the double declining method which they normally use. and it is against the matching principle.
4. the two parties directly affected are the bank and the company. Using this method the company will not have to pay all the loan off. The bank also thinks that the company is doing good which is not true.
5.the bank would be harmed because they think company is doing good but they only produced 4000 units where they should have produced 7000. the company will be benefited because they wasnt have to pay the loan off.
6. i dont think this violates any laws. it does violates the matching principle rule.
7. I would recommend that we should disclose what we have and tell the bank that business will get better.
Please let me know if i can make this better or should i make any changes to this.Any help would be greatly appreciated.
Units of production= (35000-7000)*(4000/28000) = $4000
double declining method (35000)(2/4) = $17,500
2. The units of production method would achieve the owners objective. The company wants the assets to be at least $250,000. Using the units of production method would give them current assets of $251,000.
3. it i snot ethical because company is not using the double declining method which they normally use. and it is against the matching principle.
4. the two parties directly affected are the bank and the company. Using this method the company will not have to pay all the loan off. The bank also thinks that the company is doing good which is not true.
5.the bank would be harmed because they think company is doing good but they only produced 4000 units where they should have produced 7000. the company will be benefited because they wasnt have to pay the loan off.
6. i dont think this violates any laws. it does violates the matching principle rule.
7. I would recommend that we should disclose what we have and tell the bank that business will get better.
Please let me know if i can make this better or should i make any changes to this.Any help would be greatly appreciated.
