Information: The two companies, Wild River Trading Company and New World Company, have identical transactions throughout the year and differ only in their estimation methods and adjusting year-end entries. These estimation methods (for example, Bad Debt Expense) are integral to the differences in the companies, but are not implemented until year-end. The two companies' identical transactions during the year are reflected in the following Trial Balance. Credits Trading Company Trial Balance Debits Cash $ 47,340 Accounts Receivable $ 99,400 Inventory $ 239,800 Land $ 70,000 Building $ 350,000 Equipment 80,000 Accounts Payable Commercial Bill Payable Interest Payable Capital Sales Dividend Expense 23,200 Other Operating Expenses $ 34,200 Interest Expense $ 27,650 $ 971,590 26,440 380,000 6,650 160,000 398,500 $ 971,590 As seen in this Trial Balance, both Wild River Trading Company and New World Company have the same amounts of Debits and Credits at 30th June. differently by each company, and therefore affect Net Income for each company differently. These adjustments and their effects are reflected in the Income Statements for the two companies. The Adjustments deal with Bad Debts, Cost of Goods Sold (COGS), Depreciation Expense, a Lease Agreement, and Income Tax Expense. Other Information Inventory Wild River uses a Periodic Inventory with Weighted Average and New World uses Perpetual Inventory with first-in first-out (FIFO). Depreciation The two companies both use the straight-line method for depreciation on their building. Wild River also uses the straight-line method for depreciation on their equipment. New World uses the diminishing value depreciation method for their equipment. Leased Equipment New World capitalised the Equipment Lease as an Asset. New World Company Income Statement For Year Ended 30th June 2019 Sales Cost of Goods Sold Gross Profit $ ($ $ 398,500 188,800) 209,700 Operating Expenses Bad Debt Expense Depreciation Expense Other Operating Expense Total Operating Expenses Operating Income 4,970 41,500 34,200 80,670 129,030 $ Other Expenses Interest Expense Income before Taxes Income Tax Expense Net Income 35,010 94,020 23,505) 70,515 Wild River Trading Company Income Statement For Year Ended 30th June 2019 Sales Cost of Goods Sold Gross Profit 398,500 177,000) 221,500 Operating Expenses Bad Debit Expense Depreciation Expense Other Operating Expense Total Operating Expenses Operating Income 994 19,000 34,200 54,194 167,306 Other Expenses Lease Expense Interest Expense Total Other Expenses Income before Taxes Income Tax Expense Net Income 16,000 27,650 43,650 123,656 30,914) 92,742 APPENDIX B - BALANCE SHEETS Wild River Trading Company Balance Sheet As at 30th June 2019 Assets Liabilities Current Assets Current Liabilities Cash at Bank $ 426 Accounts Payable Accounts Receivable $ 99,400 Interest Payable Allowance for Bad Debts ($994) Commerical Bill Payable Inventory $ 62,800 Total Current Assets $ 161,632 Total Current Liabilities $ $ $ 26,440 6,650 20.000 $ 53,090 Non-Current Liabilities Commerical Bill Total Liabilities $ 360,000 $ 413,090 Non-Current Assets Land Building Less Accumulated Depreciation Equipment Less Accumulated Depreciation Total Non-Current Assets $ 70,000 $ 350,000 ($10,000) $ 80,000 ($9000) $ 481,000 Equity Retained Earnings Total Equity $ $ $ 160,000 69,542 229,542 Total Assets $ 642,632 Total Liabilities and Equity $ 642,632 $ $ $ Accounts Receivable Allowance for Bad Debts Inventory Total Current Assets 99,400 ($4970) 51,000 158,235 Interest Payable Commercial Bill Payable Lease Payable Total Current Liabilities 6,650 20,000 83,360 136,450 $ Non-Current Assets Land Building Less Accumulated Depreciation $ $ $ $ 360,000 496,450 Less Accumulated Depreciation Lease Equipment Less Accumulated Depreciation 70,000 Commerical Bill 350,000 Total Liabilities ($10,000) 80,000 Equity ($20000) Capital 92,000 Retained Earnings ($11,500) Total Equity 550,500 703,765 Total Liabilities and Equity $ $ $ $ 160,000 47,315 207,315 $ $ Total Assets $ 703,765 1. Identify each Adjustment and explain the impact these adjustments have had on the Income Statement and reasons why they are different? (worth 75 marks) 2. Please recommend, which company to invest in and the reasons why? (worth 25 marks)