Saul Sellers is the Chief Accountant for Bright Day Cafe (BDC) and is close to retirement....
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Saul Sellers is the Chief Accountant for Bright Day Cafe (BDC) and is close to retirement. Traditionally, BDC provides a retirement plan that pays a bonus equal to 10 percent of the net income the restaurant reports in the year of retirement BDC has just undertaken a remodeling project that involved the purchase of a significant amount of long-term assets. Saul is concerned that the depreciation associated with the new assets will reduce the company's income, thereby reducing his retirement bonus. Saul's friend, William, tells him to reduce the impact on income by adjusting the estimates of the useful lives and salvage values of the new assets. Saul knows he has the ability to manipulate the company's income but is concerned that intentionally misrepresenting the useful life and salvage value is at best unethical and may even be illegal. Even so, he believes it is unfair for his retirement to be diminished simply because the restaurant has decided to remodel in the year he retires. Required How will net income be affected (overstated, understated, or no change) if Saul overstates the salvage value of the assets? How will net income be affected if Saul overstates the salvage value of the assets? Saul Sellers is the Chief Accountant for Bright Day Cafe (BDC) and is close to retirement. Traditionally, BDC provides a retirement plan that pays a bonus equal to 10 percent of the net income the restaurant reports in the year of retirement BDC has just undertaken a remodeling project that involved the purchase of a significant amount of long-term assets. Saul is concerned that the depreciation associated with the new assets will reduce the company's income, thereby reducing his retirement bonus. Saul's friend, William, tells him to reduce the impact on income by adjusting the estimates of the useful lives and salvage values of the new assets. Saul knows he has the ability to manipulate the company's income but is concerned that intentionally misrepresenting the useful life and salvage value is at best unethical and may even be illegal. Even so, he believes it is unfair for his retirement to be diminished simply because the restaurant has decided to remodel in the year he retires. Required How will net income be affected (overstated, understated, or no change) if Saul overstates the salvage value of the assets? How will net income be affected if Saul overstates the salvage value of the assets?
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If Saul overstates the salvage value of the assets it will result in an ... View the full answer
Related Book For
Introductory Financial Accounting for Business
ISBN: 978-1260299441
1st edition
Authors: Thomas Edmonds, Christopher Edmonds
Posted Date:
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