Paris Company and Troyer Company are competing businesses. Both began operations 6 years ago and are quite similar in most respects. The current balance sheet data for the two companies are shown below.

You have been engaged as a consultant to conduct a review of the two companies. Your goal is to determine which of them is in the stronger financial position.
Your review of their financial statements quickly reveals that the two companies have not followed the same accounting practices. The differences and your conclusions regarding them are summarized below.
1. Paris Company has used the allowance method of accounting for bad debts. A review shows that the amount of its write-offs each year has been quite close to the allowances that have been provided. It therefore seems reasonable to have confidence in its current estimate of bad debts.
Troyer Company has used the direct write-off method for bad debts, and it has been somewhat slow to write off its uncollectible accounts. Based upon an aging analysis and review of its accounts receivable, it is estimated that $20,000 of its existing accounts will probably prove to be uncollectible.
2. Paris Company has determined the cost of its merchandise inventory on a LIFO basis. The result is that its inventory appears on the balance sheet at an amount that is below its current replacement cost. Based upon a detailed physical examination of its merchandise on hand, the current replacement cost of its inventory is estimated at $517,000.
Troyer Company has used the FIFO method of valuing its merchandise inventory. Its ending inventory appears on the balance sheet at an amount that quite closely approximates its current replacement cost.
3. Paris Company estimated a useful life of 12 years and a salvage value of $30,000 for its plant and equipment. It has been depreciating them on a straight-line basis.
Troyer Company has the same type of plant and equipment. However, it estimated a useful life of 10 years and a salvage value of $10,000. It has been depreciating its plant and equipment using the double-declining-balance method.
Based upon engineering studies of these types of plant and equipment, you conclude that
Troyer€™s estimates and method for calculating depreciation are the more appropriate.
4. Among its current liabilities, Paris has included the portions of long-term liabilities that become due within the next year. Troyer has not done so.
You find that $16,000 of Troyer€™s $80,000 of long-term liabilities are due to be repaid in the current year.

Instructions
(a) Revise the balance sheets presented above so that the data are comparable and reflect the current financial position for each of the two companies.
(b) Prepare a brief report to your client stating yourconclusions.

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Cash Accounts receivable Allowance for doubtful accounts Merchandise inventory Plan Accumulated deprecion, plant and equipment Total assets Paris Company $ 70,300 309,700 (13,600) 463,900 255300 Troyer Company S 48.400 312.500 520,200 257300 t and equipment (112.650(189.850) Current liabilities Long-term liabilities Total liabilities Stockholders' equity Total liabilities and stockholders' equity 972,950 $440,200 78.000 518,200 454,750 $972,950 S948.550 $436.500 80,000 516,500 432.050 $948,550