You have been provided with the following financial statements of two companies, Aguanish Ltd. (Aguanish) and Lanigan Inc. (Lanigan).

The two companies are identical in every respect, except for how they account for their capital assets. Aguanish depreciates its assets on a straight-line basis while Lanigan depreciates its assets using the declining balance method.

Required:
a. Examine the financial statements of the two companies. Which would be a better investment? Explain.
b. Why do you think the two companies would use different depreciation methods?
c. Does it matter that the companies use different depreciation methods?Explain.

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Aguanish Ltd. Income statement for the year ended December 31, 2018 Lanigan Inc. Income statement for the year ended December 31, 2018 Sales Cost of sales Selling, general, and administrative S1,275,000 465,000 S1,275,000 465,000 expenses Depreciation expense Interest expense Income tax expense Netincome 375,000 210,000 52,000 51,000 S 122,000 375,000 325,000 52,000 51,000 S 7,000