You have just landed an accounting position
with a national telecommunications company.
Because this is your first job you are eager to please your co-workers
and your supervisor who works closely with the controller. However, your supervisor has just paid you a
visit. She told you that the controller
is concerned that profits for the last fiscal year are much less than profits
in the preceding five years. The
controller has asked that depreciation on a machine purchased at the beginning
of last year be recalculated. The
machine has a five-year useful life and is depreciated using the straight-line
method. The controller has asked that
the machine be depreciated over a ten-year useful life. Your supervisor contends that the
“depreciation thing” really doesn’t matter because the machine has
already been paid for. In addition, your
supervisor gives you an adjusting journal entry to correct what she calls
“expense transfers”. This entry
transfers items originally recorded as repairs and maintenance to capital
agree with the supervisor regarding the change in the estimated useful life of
the machine? Why or why not?
going to recalculate the depreciation and change the entry? Why or why not?
the proper accounting treatment for: (1)
repairs and maintenance and (2) plant assets?
your supervisor trying to accomplish with the suggested “expense transfers”
entry? What would be your course of
action regarding the suggested entry?
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