Dieker Container Company is suffering declining sales of its principal product, nonbiodegradeable plastic cartons. The president, Edward

Question:

Dieker Container Company is suffering declining sales of its principal product, nonbiodegradeable plastic cartons. The president, Edward Mohling, instructs his controller, Betty Fetters, to lengthen asset lives to reduce depreciation expense. A processing line of automated plastic extruding equipment, purchased for $3.1 million in January 2014, was originally estimated to have a useful life of 8 years and a of $300,000. Depreciation has been recorded for 2 years on that basis. Edward wants the estimated life changed to 12 years total, and the straight-line method continued. Betty is hesitant to make the change, believing it is unethical to increase net income in this manner. Edward says, "Hey, the life is only an estimate, and I've heard that our competition uses a 12-year life on their production equipment."

Instructions
(a) Who are the in this situation?
(b) Is the change in asset life unethical, or is it simply a good business practice by an astute president?
(c) What is the effect of Edward Mohling's proposed change on income before taxes in the year of change?

Stakeholders
A person, group or organization that has interest or concern in an organization. Stakeholders can affect or be affected by the organization's actions, objectives and policies. Some examples of key stakeholders are creditors, directors, employees,... Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...