Qin Company and Roche Company experienced the exact same set of economic events during 2006. Both companies purchased machines on January 1, 2006. Except for the effects of this purchase, the accounting records of both companies had the following accounts and balances.

The machines purchased by the companies each cost \($40,000\) cash. The machines had expected useful lives of five years and estimated salvage values of \($4,000\) . Qin uses straight-line depreciation.
Roche uses double-declining-balance depreciation.

Required:

a. For both companies, calculate the balances in the preceding accounts on December 31, 2006, after the effects of the purchase and depreciation of the machines have been applied.

b. Based on the revised account balances determined in Requirement

a, calculate the following ratios for both companies:
(1) Debt to assets ratio.
(2) Return on assets ratio.
(3) Return on equity ratio.

c. Disregarding the effects of income taxes, which company produced the higher increase in real economic wealth during 2006?

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As of January 1, 2006 Total Assets Total Liabilities Total Stockholders' Equity During 2006 Total Sales Revenue Total Expenses (not including depreciation) Liabilities were not affected by transactions in 2006. $200,000 80,000 120,000 100,000 60,000