Financial accounting 16th Edition by Jan Williams,Susan Haka,Mark Bettner ,Joseph Carcello

Exercise 14

Are Useful Lives "Flexible"

Mickey Gillespie is the controller of Print Technologies, a publicly owned company.he company is experiencing financial difficulties and is aggressively looking for ways to cut costs.uzanne Be dell, the CEO, instructs Gillespie to lengthen from 5 to 10years the useful life used in computing depreciation on certain special-purpose machinery.e dell believes that this change represents a substantial cost savings, as it will reduce the depreciation expense on, these assets by nearly one-half.
Note: The proposed change affects only the depreciation expense recognized in financial statements.epreciation deductions in income tax returns will not be affected.
Instructions
a.iscuss the extent to which Be dell's idea will, in fact, achieve a cost savings.onsider the effects on both net income and cash flows.
b.ho is responsible for estimating the useful lives of plant assets
c.iscuss any ethical issues that Gillespie should consider with respect to Bedell's instructions.