Steve Is Quickly Moving Up in the Accounting Department of RAC

question 29

Essay

Steve is quickly moving up in the accounting department of RAC Inc.It is yearend; he has just received news that the estimates of the estimated useful life and salvage values were wrong and must be changed.Of course, that changes the depreciation expense and accumulated depreciation.Steve calls his wife to explain why he will be late again.Now is he is pondering on a comment his wife made.She said "I'm no accountant; but after four years, you would think that the company could get done how its estimates affect expenses and those other accounts." What might the company be doing and what should Steve do from an ethical reasoning view?

---

Definitions:

Balance Sheet

A financial statement that provides a snapshot of a company's financial position at a specific point in time, showing assets, liabilities, and equity.

Adjusted Balance

An accounting figure reached after adjusting the book balance of an account for checks and deposits in transit, fees, or errors.

Balance Per Bank

The amount of money that a company's bank account shows according to the bank's records.

Outstanding Checks

Checks that have been written and recorded in the accounting records but have not yet been cashed or cleared by the bank.