Prior to the advent of the civil code in Quebec, a progressive landowner had decided to designate each of his children named Argon and Aubergine as partial heirs to the family fortune and would begin to distribute his assets prior to his demise. The ultimate decision regarding the distribution of the remaining assets would however, depend on which child had been more successful in managing the initial resources given to him/her.

Specifically, each would receive a small farm consisting of 300 sheep and 20 acres of land. Each twin would be allowed to manage his/her property as he/she deemed appropriate. After a designated period, the landowner would call his children before him to account for their actions. The heir to the rest of the family fortune would be chosen on the basis of which child had produced a larger increase in wealth during the test period.

At the end of the test period , Argon boasted that he had 714 (-300=414) sheep under his control while Aubergine had only 330 (-300=30). Furthermore, Argon stated that he had increased his land holdings to 27 (-20=7) acres. The 7-acre increase resulted from two transactions. First,

• on the day that the contest started, Argon used 20 sheep to buy 10 additional acres
• sold 3 of these acres for a total of 9 sheep on the last day of the test period
• Also, Argons flock had produced 75 newborn sheep during the period of accounting. He had been able to give his friends 50 sheep in return for the help that they had given him in building a fence, thereby increasing not only his own wealth but the wealth of his neighbors as well. Argon boasted that the fence was strong and would keep his herd safe from predatory creatures for 5 years.

Aubergine countered that Argon was

• holding 400 sheep that belonged to another herder. Argon had borrowed these sheep on the day that the contest had started. Furthermore, Argon had
• agreed to return 424 sheep to the herder. The 24 additional sheep represented consideration for the use of the herders flock. Argon had agreed to return the sheep immediately after the test period ended.

During the test period, Aubergines flock had

• produced 37 newborn sheep, but 2 sheep had gotten sick and died during the accounting period. Aubergine had also
• lost 5 sheep to predatory creatures. She had no fence, and some of her sheep strayed from the herd, thereby exposing themselves to danger. Knowing that she was falling behind, Aubergine had taken a spouse in order to boost her productivity. Her
• spouse owned 170 sheep on the day they were married; his sheep had produced 16 newborn sheep since the date of his marriage to Aubergine. Argon had not included the husbands sheep in his count of Aubergines herd. If her spouses sheep had been counted, Aubergines herd would contain 516 instead of 330 sheep suggested by Argons count.

Argon charged that 7 of Aubergines sheep were sick with symptoms similar to those exhibited by the 2 sheep that were now dead. ubergine interjected that she should not be held accountable for acts of nature such as illness. Furthermore, she contended that by isolating the sick sheep from the remainder of the herd, she had demonstrated prudent management practices that supported her case to be designated as heiress.

Required

Assume that landholder (Seigneur Castonguay) has hired you to assist him in resolving the issue.

Prepare a comprehensive but concise memo to him, accompanied by a relevant numerical analysis, as appropriate, showing how well each childs business performed during the year of the contest and making your recommendation to Seigneur Castonguay. Your assertions should be based on the conceptual framework and current accounting principles. Any assumptions or estimates that you make should be noted, including your assumption with respect to the monetary unit being used in your analysis.