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You have to make an investment decision, between the following two companies. Compare them and give your arguments (minimum 10) for your decision (CALCULTIONS FOR
You have to make an investment decision, between the following two companies. Compare them and give your arguments (minimum 10) for your decision (CALCULTIONS FOR MAKING COMPANIES COMPARABLE ARE REQUIRED) Balance Sheet Company A Assets Company B Cash Account receivable (net) Inventory Land Building Accumulated depreciation - Building Furniture Accumulated depreciation - Furniture Total Assets 31,000 20,000 64,000 270,000 1,200,000 (20,000) 750,000 (75,000) 2,240,000 63,000 18,000 70,000 669,000 1,500,000 (100,000) 900,000 (180,000) 2,940,000 Liabilities and OE Liabilities Owner Equity Total Liabilities and OE 1,300,000 940,000 2,240,000 1,000,000 1,940,000 2,940,000 Net profit for the year: Company A-500,000 Company B - - 400,000 Inventories Company A uses FIFO method, and Company B-LIFO. If A has used LIFO system, ending inventory would have been 7,000 lower. Plant Assets Company A uses straight-line method, with 40 years for buildings and 10 years for furniture, with estimated residual values of 400,000 for buildings and 0 for furniture. Buildings are 1 year old. Company B uses double-declining method, with 30 years for buildings. Furniture is 1 year old and has useful life of 10 years. Accounts receivable Company A uses direct write-off method and projects that 2,000 of receivables are doubtful; while aCompany B uses allowance method
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