Unit 3 Group Collaboration

For this assignment, you will be doing tasks and answering questions related to Conan Company. Information for this firm is given below. You will work on this group collaboration project in pairs assigned by your instructor. Your instructor will set up an area in Discussions that only you and your partner can access where you can discuss the project and share information. Please use this area for discussion rather than private emails. Submit your final work to the appropriate Dropbox.

Note: This collaboration will be due at the end of this unit. You should not begin it until after you have read Chapter 9.

Here is the information:

Aardvark Company and Bear Company both began operations on 1/1/11. The companies had identical balance sheets at 1/1/11, consisting of the following items:

Cash	$80,000
Merchandise Inventory (3,000 units at $3 each)	9,000
Delivery trucks	75,000
Note payable (10%)	70,000
Common stock	94,000

During 2011, the two companies had identical transactions. All five transactions described below were cash transactions.

Purchase: 3/1/11 (3,400 units at $6 each)	$20,400
Purchase: 5/1/11 (7,000 units at $8 each)	56,000
Sales: 8/1/11 (10,000 units at $15 each)	150,000
Selling expenses paid at various dates	21,000
Administrative expenses paid at various dates	17,000

The note is due with interest on 1/1/12. The delivery trucks have a useful life of five years with a total expected salvage value of $15,000. Both companies have a 30% income tax rate, and all income taxes for 2011 will be paid in 2012.

Aardvark Company wishes to report as high a net income as possible.

Bear Company wishes to report as low a net income as possible.

Step 1

Student 1: Aardvark Company wishes to report as high a net income as possible. Prepare a 2011 income statement for Aardvark. Choose the depreciation method and inventory cost flow assumption that will result in the highest net income.

Student 2: Review the income statement posted by Student 1 and make any needed corrections.

Post your answers in the appropriate Discussions area.

Step 2

Student 2: Based on the information given and the 2011 income statement prepared in Step 1, prepare a 12/31/11 balance sheet for Aardvark. Use the same depreciation method and inventory cost flow assumption as in Step 1.

Student 1: Review the balance sheet posted by Student 2 and make any needed corrections.

Step 3

Student 2: Bear Company wishes to report as low a net income as possible. Prepare a 2011 income statement for Bear. Choose the depreciation method and inventory cost flow assumption that will result in the lowest net income.

Student 1: Review the income statement posted by Student 2 and make any needed corrections.

Step 4

Student 1: Based on the information given and the 2009 income statement prepared in Step 3, prepare a 12/31/11 balance sheet for Bear. Use the same depreciation method and inventory cost flow assumption as in Step 3.

Student 2: Review the balance sheet posted by Student 1 and make any needed corrections.