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APA
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Literature & Language
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English (U.S.)
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Book name: Financial & Managerial Accounting (for Cerritos College) Page # 363 Flo Choi owns a small business and manages its accounting. Her company just finishes a year in which a large amount of borrowed funds was invested in a new building addition as well as in equipment and fixture additions. Choi's banker requires her to submit semiannual financial statements so he can monitor the financial health of her business. He has warned her that if profit margins erode, he might raised the interest rate on the borrowed funds to reflect the increased loan risk from the bank's point of view. Choi knows profit margin is likely to decline this year. As she prepares year-end adjusting entries, she decides to apply the following depreciation rule: All asset additions are considered to be in the use on the first day of the following month. (The previous rule assumed assets are in the use on the first day of the month nearest to the purchase date.) Required: 1. Identify decisions that managers like Choi must make in applying depreciation methods. 2. Is Choi's rule an ethical violation, or is it a legitimate decision in computing depreciation ? 3. How will Choi's new depreciation rule affect the profit margin of he business ? source..
Content:
Running Head: ASSET FINANCE DECISIONS IN MANAGERIAL ACCOUNTING Asset Finance Decisions in Managerial Accounting Student’s Name: Professor’s Name: Course Details: Date Submitted: Assuming that most small business managers and accountants like Choi use the straight line depreciation method, it would probably be best to switch to other depreciation methods such as accelerated depreciation. This is probably because, the straight line depreciation method, though simple, is time consuming compared to other forms of depreciation. For Choi, she has invested heavily in almost every category of depreciation provided by the federal gov...
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