Ryan Company has as a goal that its earnings per share should increase by at least 3%
Question:
You are the accountant for Ryan Company. Ryan’s controller, Jim Nastic, has come to you with some suggestions. He says, “I’ve noticed that the decrease in revenues has been primarily related to credit sales. Since we have fewer credit sales, I believe we are justified in reducing our bad debts expense from 4 to 2% of net sales. I also think that because of the decreased sales, we won’t use our factory equipment as much, so we can extend its estimated remaining life from 10 to 15 years for computing our straight-line depreciation expense. Based on my calculations, if we make these changes, Ryan Company’s 2007 earnings per share will be $3.06. This will sure make our stockholders happy, not to mention our CEO. You may even get a promotion. What do you think?”
Required
From financial reporting and ethical perspectives, prepare a response to Jim Nastic regarding his suggestions.
Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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Related Book For
Intermediate Accounting
ISBN: 978-0324300987
10th Edition
Authors: Loren A Nikolai, D. Bazley and Jefferson P. Jones
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