Question

Aston Projected Income Statement YE 12/31/2014 Sales       29,000,000 COGS   $14,000,000   Depreciation expense   2,600,000   Operating Expense  ...

Aston Projected Income Statement

YE 12/31/2014
Sales       29,000,000
COGS   $14,000,000  
Depreciation expense   2,600,000  
Operating Expense   6,400,000   23,000,000
Income Before Tax       6,000,000
Tax Expense       3,000,000
Income After Taxes       3,000,000
ASTON CORPORATION SELECTED BALANCE SHEET INFORMATION
AT DECEMBER 31, 2012

Estimated cash balance       $5,000,000
Available-for-sale securities (at cost)       10,000,000
Fair value adjustment (1/1/12)       200,000
Estimated Fair Value at December 31st 2014

Security   Cost   Estimated Market
A   2,000,000   2,200,000
B   4,000,000   3,900,000
C   3,000,000   3,100,000
D   1,000,000   1,800,000
Total   10,000,000   11,000,000
Other Info As of December 31st 2014

Equiptment- $3,000,000

Accumulated Depreciation (5-Year SL)- 1,200,000

New Robotic Equiptment (Purchased 1/1/14)- 5,000,000

Accumulated Depreciation (5-year DDB)- 2,000,000

The corporation has never used robotic equipment before, and Warren assumed an accelerated method because of the rapidly changing technology in robotic equipment. The company normally uses straight-line depreciation for production equipment.
Aston explains to Warren that it is important for the corporation to show a $7,000,000 income before taxes because Aston receives a $1,000,000 bonus if the income before taxes and bonus reaches $7,000,000. Aston also does not want the company to pay more than $3,000,000 in income taxes to the government.

Instructions: answer the following A and B.

A)What can Warren do within GAAP to accommodate the president's wishes to achieve $7,000,000 in income before taxes and bonus? Present the revised income statement based on your decision.

B)2) are the actions ethical and who are the stake holders in this decision?

Homework Answers

Answer #1

PART A

The only option before Warren is to use straight line depreciation instead of the double declining balance method of depreciation for the robotic equipment. The depreciation under SL method would be $ 5,000,000 / 5 = $ 1,000,000 instead of $ 2,000,000.

Sheridan Corporation

Projected Income Statement

  • For the year ended December 31, 2017

    Sales 29,000,000
    Cost of Goods Sold 14,000,000
    Depreciation (2600000-2000000+1000000=16000000

    1,600,000

    Operating Expenses 6,400,000
    Income before Income Tax 22,000,000
    Profit 7000000

No the action was not ethcal as it wrongly inflated the profits.  

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Mark Industries' income statement and related notes for the year ended December 31 are as follows...
Mark Industries' income statement and related notes for the year ended December 31 are as follows (in $): Sales 42,000,000 Cost of Goods Sold (32,000,000) Wages Expense (1,500,000) Depreciation Expense (2,500,000) Interest Expense (1,000,000) Income Tax Expense (2,000,000) Net Income 3,000,000 During the year: •         Wages Payable increased $100,000. •         Accumulated Depreciation increased $2,500,000. •         Interest Payable decreased $200,000. •         Income Taxes Payable increased $500,000. •         Dividends of $100,000 were declared and paid. Under U.S. GAAP, Mark Industries' cash flow from operations (CFO) for the...
Untitled Document Mark Industries' income statement and related notes for the year ended December 31 are...
Untitled Document Mark Industries' income statement and related notes for the year ended December 31 are as follows (in $). Sales 42,000,000 Cost of Goods Sold (32,000,000) Wages Expense (1,500,000) Depreciation Expense (2,500,000) Interest Expense (1,000,000) Income Tax Expense (2,000,000) Net Income 3,000,000 During the year: Wages Payable increased .$100,000 Accumulated Depreciation increased $2,500,000. Interest Payable decreased $200,000. Income Taxes Payable increased $500,000. Dividends of $100,000 were declared and paid. Assuming U.S. GAAP, Mark Industries’ cash flow from operations (CFO)...
                  Income Statement Sales $ 15,000 Operating expenses COGS $ 11,000 Depreciation          
                  Income Statement Sales $ 15,000 Operating expenses COGS $ 11,000 Depreciation            800 Admin expenses         1,500 Total operating expense      13,300 Operating income         1,700 Interest revenue            200 Gain on disposal of equipment            400 Income before taxes         2,300 Income tax            920 Net income $    1,380 Balance sheet Assets This year Last year Cash $    3,000 $    1,100 A/R            500            530 Inventory            850            820 Prepaid Ins            150            200 Equipment...
Complete a Statement of Retained Earnings ABC Corporation Income Statement For the Year Ended December 31,...
Complete a Statement of Retained Earnings ABC Corporation Income Statement For the Year Ended December 31, 2014 Sales Revenue    792,845 Less: Operating Expenses Wages Expense         80,350 Office Expense         21,700 Utilities Expense         31,000 Advertising Expense $       8,400 Insurance Expense         82,000 Employee Compensation Expense         10,000 Bad Debt Expense         25,000 Pension Expense         40,000 Depreciation Expense         33,759 Total Operating Expenses    332,209 Income from Operations    460,636 Other Revenue/Expenses Rent Revenue         12,000 Interest Income...
Prepare an Income Statement ABC Corporation Adjusted Trial Balance December 31, 2014 Debit Credit Accounts Payable...
Prepare an Income Statement ABC Corporation Adjusted Trial Balance December 31, 2014 Debit Credit Accounts Payable $           65,340 Accounts Receivable              190,300 Accumulated Depreciation: Building $             5,400 Accumulated Depreciation: Equipment               29,359 Accumulated Other Comprehensive Income               15,000 Additional Paid in Capital - Treasury Stock               21,000 Advertising Expense                  8,400 Allowance for Doubtful Accounts               25,000 Bad Debt Expense                25,000 Bonds Interest Expense                43,088 Bonds Payable           1,600,000 Building              150,000 Cash            1,270,676 Common Stock            ...
Prepare the income statement ABC Corporation Adjusted Trial Balance December 31, 2014 Debit Credit Cash $                ...
Prepare the income statement ABC Corporation Adjusted Trial Balance December 31, 2014 Debit Credit Cash $                 650,729 Short term investments                     167,000 Fair value adjustment (Trading)                         8,000 Accounts receivable                     200,200 Allowance for doubtful accounts $                25,000 Inventory                       75,000 Purchases                               - Prepaid insurance                       16,400 LT (Debt) investments (HTM)                     177,824 Land                       75,000 Building                     150,000 Accumulated depreciation: building                     4,400 Equipment                       60,000 Accumulated depreciation: equipment                   22,000 Patent                       27,500 Accounts payable                   75,240...
Income Statement                                        &nbs
Income Statement                                           Balance Sheet Sales $20,000,000   Assets: Cost of Goods Sold 8,000,000 Cash $ 5,000,000 12,000,000 Marketable Securities 12,500,000 Selling and Administrative 1,600,000 Accounts Receivable, net 2,500,000 Depreciation 3,000,000 Inventory 30,000,000 7,400,000 Prepaid Expenses 5,000,000 Interest 2,000,000 Plant & Equipment 30,000,000 5,400,000                 Taxes (40%) 2,160,000   Total Assets 85,000,000 3,240,000                 Common Stock Div. 600,000 Liabilities and Equity: $2,640,000 Accounts Payable $20,000,000 Notes Payable                 5,000,000 Accrued Expenses          5,000,000 Bonds                            25,000,000 Common Stock                5,000,000 Capital in Excess of Par 10,000,000 Retained...
The Alexander Company reported the following income statement for 2016: Sales $15,000,000 Less: Operating expenses Wages,...
The Alexander Company reported the following income statement for 2016: Sales $15,000,000 Less: Operating expenses Wages, salaries, benefits $6,000,000 Raw materials 3,000,000 Depreciation 1,500,000 General, selling, and administrative expenses 1,500,000 Total operating expenses 12,000,000 Earnings before interest and taxes (EBIT) $3,000,000 Less: Interest expense 750,000 Earnings before taxes $2,250,000 Less: Income taxes 1,000,000 Earnings after taxes $1,250,000 Less: Preferred dividends 250,000 Earnings available to common stockholders $1,000,000 Earnings per share—250,000 shares outstanding $4.00 Assume that all depreciation and 75 percent...
Income Statement Sales revenues 760,500 cost of goods sold 225,000 Operating expenses (excluding depreciation) 166,500 Depreciation...
Income Statement Sales revenues 760,500 cost of goods sold 225,000 Operating expenses (excluding depreciation) 166,500 Depreciation expenses 13,500 Loss on disposal of equipment 4,500 Interest expenses 63,000 Total operating expenses (472,500) income before taxes 288,000 income tax expense (70,500) net income 217,500 Statement of financial Positions 31/12/2019 31/12/2018 Assets Cash 82,500 49,500 accounts receivables 30,000 45,000 inventory 22,500 15,000 prepaid insurance 7,500 1,500 Land 195,000 30,000 Building 240,000 60,000 less: accumulated depreciation- Building (16,500) (7,500) Equipment 40,500 15,000 less: accumulated...
WALLIS CORPORATION Statement of Financial Position As at December 31, 2014 Assets 2014 2013 Cash $88,600...
WALLIS CORPORATION Statement of Financial Position As at December 31, 2014 Assets 2014 2013 Cash $88,600 $49,100 Accounts receivable 85,000 59,400 Prepaid insurance 70,000 60,000    Total current assets 243,600 168,500 Property, equipment and vehicles 360,000 305,000 Accumulated depreciation -110,400 -105,900    Total non-current assets 249,600 199,100 Total Assets $493,200 $367,600 Liabilities and Shareholders' Equity Accounts payable $21,500 $18,600 Wages Payable 3,000 4,000    Total current liabilities 24,500 22,600 Bank loan payable 50,000 60,000    Total liabilities 74,500 82,600 Common...