(Presentation of Property, Plant, and Equipment) Carol Keene, corporate cotroller for Dumaine Industries, is trying to decide how to present “Property, plant, and equipment” in the balance sheet. She realizes that the statement of cash flows will show that the company made a significant investment in purchasing new equipment this year, but overall she knows the company’s plant assets are rather old. She feels that she can disclose one figure titled “Property, plant, and equipment, net of depreciation,” and the result will be a low figure. However, it will not disclose the age of the assets. If she chooses to show the cost less accumulated depreciation, the age of the assets will be apparent. She proposes the following.
|
Property, plant, and equipment, |
$10,000,000 |
|
rather than |
|
|
Property, plant, and equipment |
$50,000,000 |
|
Less: Accumulated depreciation |
40,000,000 |
|
Net book value |
$10,000,000 |
Instructions
Answer the following questions.
(a) What are the ethical issues involved?
(b) What should Keene do?