Bedells Case Study

Accounting

A.) The extents to which Bedell's idea will, in fact, achieve cost savings are to depreciate assets over a longer period of time than for the financial statement. This lowers the annual charges of the depreciation expense in the income statement and the net income will get higher.

B.) Management is responsible for estimating the useful lives of plan assets.

C.) Ethical issues that Gillespie should consider with respect to Bedell's instructions are about the changes made in estimated useful lives and whether or not is reasonable, also if it will screw up the company's financial statements. If there is no problem with this, then he can change the estimated useful lives, but if he thinks there will be a problem then he should not change it or have any action in doing so.

Accounting

A.) Given that the company hopes for at least partial reimbursement from the insurance company, yes it would really be unethical for management to postpone recording the inventory loss in the financial statements it submits to the bank because the inventory has been lost and you can't just wait or hope that someday it can be reduced.

B.) No it is not possible to increase the company's current ratio from 0.8 to 1 to 1.2 to 1 by purchasing more inventory on the accounts because then the purchasing inventory on the account will make the current ratio go up . So if the current ratio goes over 1 to 1 then purchasing inventory on the account will lower the ratio.

C.) The approach I think the company should follow in dealing with the bank would be to tell them the truth. Usually they will understand the situation. Or try to solve the problem anyway they can.

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