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the overnight shipper, had assets of $21,000,000

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On May 31, 2012, Express Delivery, the overnight shipper, had total assets of $21,000,000,000
and total liabilities of $13,000,000,000. Included among the assets were property, plant, and
equipment with a cost of $17,000,000,000 and accumulated depreciation of $10,000,000,000.
During the year ended May 31, 2012, Express Delivery earned total revenues of $28,000,000,000
and had total expenses of $25,000,000,000, of which $8,000,000,000 was depreciation expenses.
The CFO and the controller are concerned that the results of 2012 will make investors unhappy.
Additionally, both hold stock options to purchase shares at a reduced price, so they would like to
see the market price continue to grow. They decide to “extend” the life of assets so that
depreciation will be reduced to $5,000,000,000 for 2012.
Explain.
SOLUTION
1
It is seen from the data that the assets is extend as we have total assets of $21,000,000,000 in
May 31, 2012 and when we move forward toward May 31, 2012 we have total revenues of
$28,000,000,000 and had total expenses of $25,000,000,000
2
The impact of the change on the net income on the Express Delivery is that when we see the
Extending in the life of the assets will result in an increase to net income for 2012 in the amount
of $3,000,000,000. ($8,000,000,000 - $5,000,000,000).
3

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On May 31, 2012, Express Delivery, the overnight shipper, had total assets of $21,000,000,000 and total liabilities of $13,000,000,000. Included among the assets were property, plant, and equipment with a cost of $17,000,000,000 and accumulated depreciation of $10,000,000,000. During the year ended May 31, 2012, Express Delivery earned total revenues of $28,000,000,000 and had total expenses of $25,000,000,000, of which $8,000,000,000 was depreciation expenses. The CFO and the controller are concerned that the results of 2012 will make investors unhappy. Additionally, both hold stock options t ...
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