Eskimo Pie Corporation markets a broad range of frozen treats, including its famous Eskimo Pie ice cream bars

Eskimo Pie Corporation markets a broad range of frozen treats, including its famous Eskimo Pie ice cream bars. The following items were taken from a recent income statement and balance sheet. In each case identify whether the item would appear on the balance sheet (BS) or income statement (IS).

a) Income tax expense
b) Inventories
c) Amount payable
d) Retained earnings
e) Property, plant and equipment
f ) Net sales
g) Cost of goods sold
h) Common stock
i) Receivables
j) Interest expense


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At the beginning of 2009, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods

Ethics Case 11-10; Asset impairment

At the beginning of 2009, the Healthy Life Food Company purchased equipment for $42 million to be used in the manufacture of a new line of gourmet frozen foods. The equipment was estimated to have a 10-year service life and no residual value. The straight-line depreciation method was used to measure depreciation for 2009 and 2010.

Late in 2011, it became apparent that sales of the new frozen food line were significantly below expectations. The company decided to continue production for two more years (2012 and 2013) and then discontinue the line. At that time, the equipment will be sold for minimal scrap values.

The controller, Heather Meyer, was asked by Harvey Dent, the company's chief executive officer (CEO), to determine the appropriate treatment of the change in service life of the equipment. Heather determined that there has been impairment of valued requiring an immediate write-down of the equipment of $12,900,000. The remaining book value would then be depreciate over the equipment's revised service life.

The CEO does not like Heather's conclusion because of the effect it would have on 2011 income. "Looks like a simple revision in service life from 10 years to 5 years." Dent concluded. "let's go with it that way, Heather."

Required:
1. What is the difference in before-tax income between the CEO's and Heather's treatment of the situation?
2. Discuss Heather Meyer's ethical dilemma.

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Icy Treats, Inc., is a seasonal business that sells frozen desserts

E15–2 Icy Treats, Inc., is a seasonal business that sells frozen desserts. At the peak of its summer selling season the firm has $35,000 in cash, $125,000 in inventory, $70,000 in accounts eceivable, and $65,000 in accounts payable. During the slow winter period the firm holds $10,000 in cash, $55,000 in inventory, $40,000 in accounts receivable, and $35,000 in accounts payable. Calculate Icy Treats’ minimum and peak funding requirements.

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