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Flounder Company and Novak Company are two companies that are similar in many respects. One difference is that Flounder Company uses the straight-line method and
Flounder Company and Novak Company are two companies that are similar in many respects. One difference is that Flounder Company uses the straight-line method and Novak Company uses the declining-balance method at double the straight-line rate. On January 2, 2020, both companies acquired the depreciable assets shown below. Asset Buildings Equipment Cost $320,000 140,000 Flounder Company Novak Company 2020 Salvage Value $30,000 $82,500 70,000 4,000 Including the appropriate depreciation charges, annual net income for the companies in the years 2020, 2021, and 2022 and total income for the 3 years were as follows. 2021 $86,900 Useful Life 78,000 40 years 10 years 2022 $88,500 87,000 Total $257,900 235,000 At December 31, 2022, the balance sheets of the two companies are similar except that Novak Company has more cash than Flounder Company, and net property, plant, and equipment are different. Lynda Peace is interested in buying one of the companies. She comes to you for advice.
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