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Decision Making Across the Organization BYP9-4 Reimer Company and Lingo Company are two companies that are similar in many respects. One difference is that
Decision Making Across the Organization BYP9-4 Reimer Company and Lingo Company are two companies that are similar in many respects. One difference is that Reimer Company uses the straight-line method and Lingo Company uses the declining-balance method at double the straight-line rate. On January 2, 2009, both companies acquired the following depreciable assets. c Asset Building Equipment Cost $320,000 110,000 Reimer Company Lingo Company Residual Value $20,000 10,000 Including the appropriate depreciation charges, annual net, income for the companies in the years 2009, 2010, and 2011 and total income for the 3 years were as follows. 2009 $84,000 68,000 Useful Life 40 years 10 years 2010 $88,400 76,000 2011 $90,000 85,000 Total $262,400 229,000 At December 31, 2011, the statements of financial position of the two companies are similar ex- cept that Lingo Company has more cash than Reimer Company. Sally Vogts is interested in buying one of the companies. She comes to you for advice. Instructions With the class divided into groups, answer the following. (a) Determine the annual and total depreciation recorded by each company during the 3 years. (b) Assuming that Lingo Company also uses the straight-line method of depreciation instead of the declining-balance method as in (a), prepare comparative income data for the 3 years. (c) Which company should Sally Vogts buy? Why?
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