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LO 2) Aston Corporation performs year-end planning in Novemberof each year before its calendar year ends in December. Thepreliminary estimated net income is $3 million. The CFO, RitaWarren, meets with the company president, J. B. Aston, to reviewthe projected numbers. She presents the following projectedinformation.

ASTON CORPORATION PROJECTED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2017
Sales		$28,995,000
Interest revenue		5,000
Cost of goods sold	$14,000,000
Depreciation	??2,600,000
Operating expenses	??6,400,000	?23,000,000
Income before income tax		6,000,000
Income tax		??3,000,000
Net income		$?3,000,000

ASTON CORPORATION SELECTED BALANCE SHEET INFORMATION AT DECEMBER 31, 2017
Estimated cash balance	$?5,000,000
Available-for-sale debt investments (at cost)	?10,000,000
Fair value adjustment (1/1/17)	—0—

Estimated fair value at December 31, 2017:

Security	Cost	Estimated Fair Value
A	$?2,000,000	$?2,200,000
B	??4,000,000	??3,900,000
C	??3,000,000	??3,100,000
D	??1,000,000	??1,800,000
Total	$10,000,000	$11,000,000

Other information at December 31, 2017:

Equipment	$3,000,000
Accumulated depreciation (5-year SL)	1,200,000
New robotic equipment (purchased 1/1/17)	5,000,000
Accumulated depreciation (5-year DDB)	2,000,000

The corporation has never used robotic equipment before, andWarren assumed an accelerated method because of the rapidlychanging technology in robotic equipment. The company normally usesstraight-line depreciation for production equipment.

Aston explains to Warren that it is important for thecorporation to show a $7,000,000 income before taxes because Astonreceives a $1,000,000 bonus if the income before taxes and bonusreaches $7,000,000. Aston also does not want the company to paymore than $3,000,000 in income taxes to the government.

Instructions

(a)  

What can Warren do within GAAP to accommodate the president'swishes to achieve $7,000,000 in income before taxes and bonus?Present the revised income statement based on your decision.

(b)  

Are the actions ethical? Who are the stakeholders in thisdecision, and what effect do Warren's actions have on theirinterests?