Need some help with this one.
Oriole Company and Sunland Company are competing businesses. Both began operations 6 years ago and are quite similar in most respects. The current balance sheet data for the two companies are shown below. Accounts receivable Allowance for doubtful accounts Inventory Plant and equipment Accumulated depreciation-plant and equipment Total assets Current liabilities Long-term liabilities Total abilities Stockholders' equity Total liabilities and stockholders' equity Oriole Company $59.631 313.236 (146391 432.050 271.000 (122.000) $939.288 $432.035 77.780 509,815 429.473 5939.288 Sunland Company $53,086 317.970 0 538,461 262.000 (193.318) $976,199 $464630 79.080 543710 432.489 5976, 199 You have been engaged as a consultant to conduct a review of the two companies. Your goal is to determine which of them is in the stronger financial position Your review of their francial statements quickly reveals that the two companies have not followed the accounting practices. The differences and your conclusions regarding them are summarized below 1. Oriole Company has used the allowance method of accounting for bad debts. A review shows that the amount of its write-offs each year has been quite close to the allowances that have been provided. It therefore seems reasonable to have confidence in its current estimate of bad debts. Sunland Company has used the direct write-off method for bad debts, and it has been somewhat slow to write off its uncollectible accounts. Based upon an aging analysis and review of its accounts receivable, it is estimated that $17,180 of its existing accounts will probably prove to be uncollectible 2. Oriole Company has determined the cost of its merchandise inventory on a LIFO basis. The result is that its inventory appear on the balance sheet at an out that is below its current replacement cost. Based upon a detailed physical examination of its merchandise on hand, the current replacement cost of its inventory is estimated $538.250 Sunland Company has used the FIFO method of valuing its merchandisinventory Its ending inventory cars on the balance sheet at an amount that quite closely approximates its current replacement cost. 3. Oriole Company estimated a useful life of 12 years and a stage value of $27.000 for its plant and equipment. It has been depreciating them on a straight line basis. Sunland Company has the same type of plant and equipment. However, it estimated a useful life of 10 years and a salvage value of $11.000. It has been depreciating its plant and equipment using the double declining balance method Based upon engineering studies of these types of plant and equipment, you conclude that Sunlandestinades and method for calculating depreciation are the more appropriate 4. Among its current liabilities. Oriole has included the portions of long-term liabilities that become due within the next year. Sunland has not done so You find that $17,150 of Sunland's $79,080 of long-term abilities are due to be repaid in the current year Revise the balance sheets presented above so that omparable and reflect the current financial position for each compare You find that $17,150 of Sunland's $7 Revise the balance sheets presented above so that the data are comparable and reflect the current financial position for each of the two companies. Oriole Company Sunland Company Cash $ $ Accounts Receivable Allowance for Doubtful Accounts Inventory Plant and Equipment Accumulated Depreciation Total Assets $ $ Current Liabilities $ Long-term Liabilities Total Liabilities Stockholders' Equity Total Liabilities and Stockholders' Equity $ e Textbook and Media Save for Later
