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The manager of ABC Company bought 50 trucks for the business use. When he recorded the...

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Accounting

The manager of ABC Company bought 50 trucks for the businessuse. When he recorded the trucks, he doubled the estimated life ofthe trucks. The second year he increased the residual value.Requirements 1. Explain why he doubled the estimated life in thefirst year. 2. Explain why he increased the residual value. 3.Discuss the GAAP issues of each of the above 4. Discuss the ethicalissue of each of the above

each requirement with at least 5 complete grammatically correctsentences.

Answer & Explanation Solved by verified expert
4.0 Ratings (529 Votes)
1 The manager of ABC company has doubled the estimated life in the first year so that lesser depreciation costs are reported in income statement which eventually would inflate the profits He might be doing so to influence the potential investors by creating a facade of success For a lot of investors book value or net asset value NAV offers a relatively precise and unbiased valuation benchmark But again Managements choice of depreciation method can also significantly impact book value 2 Theres the issue with the scrap value as well that the Manager of ABC Company chose We can see the reason behind Managers decision The longer    See Answer
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