Question Details

(Solution) - Everybody knew Ed McAlister was a brilliant businessman He had

Brief item decscription

Solution download

Item details:

Everybody knew Ed McAlister was a brilliant businessman. He had taken a small garbage collection company in Kentucky and built it up to be one of the largest and most profitable waste management companies in the Midwest. But when he was convicted of a massive financial fraud, what surprised everyone was how crude and simple the scheme was. To keep the earnings up and the stock prices soaring, he and his cronies came up with an almost foolishly simple scheme: First, they doubled the useful lives of the dumpsters. That allowed them to cut depreciation expense in half. The following year, they simply increased the estimated salvage value of the dumpsters, allowing them to further reduce depreciation expense. With thousands of dumpsters spread over 14 states, these simple adjustments gave the company an enormous boost to the bottom line. When it all came tumbling down, McAlister had to sell everything he owned to pay for his legal costs and was left with nothing.
1. If an asset has either too long a useful life or too high an estimated salvage value, what happens, from an accounting perspective, when that asset is worn out and has to be disposed of?
2. Do the rules of GAAP (generally accepted accounting principles) mandate specific lives for different types of assets? What is the role of the outside auditor in evaluating the reasonableness of depreciation lives and salvage values?


About this question:

This question was answered on: Jul 11, 2017

PRICE: $15 (18.37 KB)

Buy this answer for only: $15

Pay using PayPal (No PayPal account Required) or your credit card. All your purchases are securely protected by PayPal.

Need a similar solution fast, written anew from scratch? Place your own custom order

We have top-notch tutors who can help you with your essay at a reasonable cost and then you can simply use that essay as a template to build your own arguments. This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. New solution orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

Order Now