Comprehensive Problem for Chapters 8-11 Comparing Two Businesses Suppose you created a software package, sold the business, and now are ready t invest in a resort property. Several locations look promising Monterrey, California Durango, Colorados and Mackinac Island, Michigan. Each place has its appeal Durango wins out. Two small resorts are available in Durango. The property ers provide the following data: Gold Rush Resorts Hideawa Cash S 31,000S Accounts receivable 20,000 18, 64,000 270,000 669 1,200,000 1,500 20,000)( 750,000 Total assets 1,300,000 $1,000, Owner's equity Total liabilities and owner's equity Income statements for the last year report net income of $500,000 Rush Resorts and $400,000 for Mountain Hideaway. Gold Rush Resorts uses the FIFO inventory method, and Mountain Hidea LIFO. If Gold Rush had used LIFO, its ending i lowet. (pp. 320-321) inventory would have been Plant Assets Gold Rush Resorts uses the straight-line depreciation method and an esti ful life of 40 years for buildings and 10 years for furniture. Estimated restdu are $400,000 for buildings and $0 for furniture. Gold Rush's old. (p. 512) ates buildings over 30 years. The furniture, also 1 year old, is being depr 10 years. (p. 514) Accounts Receivable Gold Rush Resorts uses the direct write-off method for Mountain Hideaway uses the allowance method. The Gold Rush 592 Chapter 11 that $2,000 of the company's receivables are doubtful. Mountain Hideaway receiv ables are already reported at net realizable value. (pp. 460,464 Requirements 1. To compare the two resorts, convert Gold Rush Resorts' net income to the accounting methods and the estimated useful lives used by Mountain Hideaway. 2. Compare the two resorts' net incomes after you have revised Gold Rush's fig- ures. Which resort looked better at the outset? Which looks better when they are placed on equal footing? Comprehensive Problem for Chapters 8-11 Comparing Two Businesses Suppose you created a software package, sold the business, and now are ready t invest in a resort property. Several locations look promising Monterrey, California Durango, Colorados and Mackinac Island, Michigan. Each place has its appeal Durango wins out. Two small resorts are available in Durango. The property ers provide the following data: Gold Rush Resorts Hideawa Cash S 31,000S Accounts receivable 20,000 18, 64,000 270,000 669 1,200,000 1,500 20,000)( 750,000 Total assets 1,300,000 $1,000, Owner's equity Total liabilities and owner's equity Income statements for the last year report net income of $500,000 Rush Resorts and $400,000 for Mountain Hideaway. Gold Rush Resorts uses the FIFO inventory method, and Mountain Hidea LIFO. If Gold Rush had used LIFO, its ending i lowet. (pp. 320-321) inventory would have been Plant Assets Gold Rush Resorts uses the straight-line depreciation method and an esti ful life of 40 years for buildings and 10 years for furniture. Estimated restdu are $400,000 for buildings and $0 for furniture. Gold Rush's old. (p. 512) ates buildings over 30 years. The furniture, also 1 year old, is being depr 10 years. (p. 514) Accounts Receivable Gold Rush Resorts uses the direct write-off method for Mountain Hideaway uses the allowance method. The Gold Rush 592 Chapter 11 that $2,000 of the company's receivables are doubtful. Mountain Hideaway receiv ables are already reported at net realizable value. (pp. 460,464 Requirements 1. To compare the two resorts, convert Gold Rush Resorts' net income to the accounting methods and the estimated useful lives used by Mountain Hideaway. 2. Compare the two resorts' net incomes after you have revised Gold Rush's fig- ures. Which resort looked better at the outset? Which looks better when they are placed on equal footing
