Link Back to Chapter 9 (Inventory Methods). Suppose you are considering investing in two businesses, Astoria Enterprises and Hilton Systems. The two companies are virtually identical, and both began operations at the beginning of the current year. During the year. each company purchased inventory as follows: Jan. 4 10.000 units at $4 = $ 40.000 Apr. 6 5,000 units at 5= 25,000 Aug. 9 7,000 units at 6= 42.000 Nov. 27 Totals 10.000 units at 7 = 70,000 32,000 $177,000 During the first year, both companies sold 25,000 units of inventory. In early January, both companies purchased equipment costing $143.000 (ten-year estimated useful life and a $20.000 residual value). Astoria uses the inventory and depreci- ation methods that maximize reported income (FIFO and straight-line). By contrast. Hilton uses the inventory and depreciation methods that minimize income tax payments (LIFO and double-declining-balance). Both companies' trial balances at December 31 included the following: Sales revenue.. Operating expenses $370,000 80,000 Required 1. Prepare both companies' income statements. 2. Write an investment newsletter to address the following questions for your clients: Which company appears to be more profitable? Which company has more cash to invest in promising projects? If prices continue rising in both companies' industries over the long-term, which company would you prefer to invest in? Why?