Flo Choi owns a small business and manages its accounting. Her company just finished a year in which a large amount

| April 14, 2018

Flo Choi owns a small business and manages its accounting. Her company just finished a year in which a large amount of borrowed funds was invested in a new building addition aswell as in equipment and fixture additions. ChoiÂ’s banker requires her to submit semiannual financialstatements so he can monitor the financial health of her business. He has warned her that if profitmargins erode, he might raise the interest rate on the borrowed funds to reflect the increased loan riskfrom the bankÂ’s point of view. Choi knows profit margin is likely to decline this year. As she preparesyear-end adjusting entries, she decides to apply the following depreciation rule: All asset additionsare considered to be in use on the first day of the following month. (The previous rule assumedassets are in use on the first day of the month nearest to the purchase date.)Required1. Identify decisions that managers like Choi must make in applying depreciation methods.2. Is ChoiÂ’s rule an ethical violation, or is it a legitimate decision in computing depreciation?3. How will ChoiÂ’s depreciation rule affect the profit margin of her business?

Order your essay today and save 30% with the discount code: ESSAYHELP
Order your essay today and save 30% with the discount code: ESSAYHELPOrder Now