It is the end of 2007 and you are an accountant for the Stone Company. During 2007, sales of the company’s products slumped and the company’s earnings are expected to be much less than those of 2006. The president comes to you with an idea. He says, “Our Company’s property, plant, and equipment cost $300,000, and that is the amount we usually report on our balance sheet. However, I just had these assets appraised by an independent appraiser, and she says they are worth $400,000. I think that the company should report the property, plant, and equipment at this amount on its December 31, 2007 balance sheet, and should report the $100,000 increase in value as a gain on the 2007 income statement. If we use this approach, it will show how much our company is really worth and increase our earnings. This will make our stockholders happy. What do you think?”

Required
Prepare a written response to the president.