Question
Co. A has elected to expense all purchase of long-term assets in the year of purchase while Co B elects to capitalize such assets and
Co. A has elected to expense all purchase of long-term assets in the year of purchase while Co B elects to capitalize such assets and depreciate over the estimated useful life by the use of the straight line method of each related asset.
Q 1-which accounting method is correct? Why?
Q2 _Justify each approach?
Q3-In year 1 of operations, Compare each of the following ratios of Co. A in comparison with Co. Bs. Briefly explain why? + Increase + decrease - or no change
1- Profit ratio
2- Debt ratio
3-current ratio
4-return on assets
5-return on equity
6- Asset turnover
7-Inventory turnover
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