You are currently engaged in the performance of the 2010 annual audit of United Department Stores Inc.(henceforth UDS) UDS is the second largest retail department store in the US with projected 2010 consolidated total assets of approximately 18 billion and projected consolidated sales of 7 billion. Consolidated Net income for the year ended January 31, 2010 is currently projected to be somewhere in the neighborhood of $ 150 million. You are currently performing pre-closing audit field work during the last week of January 2010. In the course of performing your field work you discover the following circumstance:

UDS proposes to suspend $28 million of 2009 depreciation charges applicable to its new discount department store chain, Details underlying this proposal are as follows:

UDS acquired all of the net assets of Worthless Stores Inc. on July 31, 2008 for $ 850 million. Worthless had been a moderately successful national retailer that owned and operated 60 relatively modern stores. These store facilities were located in major cities in 25 of the 50 States. Cost assigned to the 60 stores acquired was $ 425 million. Land acquired was valued at $ 40 million. From July 31, 2008 until March 30 2009 UDS wound down the operations of the Worthless Stores and sold-off most of the existing inventories. On March 31, 2009 UDS closed the Worthless Stores and began a program to re-decorate and re-equip them for a new Discount Retail Department Store Operation. This plan had been contemplated at the time the Worthless Stores were acquired. The newly outfitted stores were to carry the name: “GOLD SQUARE DEPARTMENT STORES” (henceforth GSDS). Redecorating and re-outfitting of the GSDS required exactly seven months. This activity began on April 1, 2009 and carried-on until September 30, 2009. During the month of September, new employees were hired and the stores were