Final answer:
The difference in before-tax income arises from the depreciation expense. Heather faces an ethical dilemma in manipulating the expense to satisfy the CEO's request.
Step-by-step explanation:
The difference in before-tax income between the CEO's and Heather's treatment of the situation is the result of the depreciation expense. Heather determined that there has been an impairment of value requiring an immediate write-down of the equipment, resulting in a higher depreciation expense. On the other hand, the CEO wants to revise the service life of the equipment, which would result in a lower depreciation expense. The difference in depreciation expense will directly impact the before-tax income of the company.
Heather's ethical dilemma arises from the CEO's request to manipulate the depreciation expense for superficial reasons. Heather has a professional responsibility to accurately report the financial statements and adhere to accounting standards. By going along with the CEO's request, Heather would compromise her professional integrity and potentially mislead investors, creditors, and other stakeholders.