assume that you are examining the balance sheets of two companies and note the follo 650358

Writing Assignment Impact of historical cost on asset presentation on the balance sheet

Assume that you are examining the balance sheets of two companies and note the following information.

	Company A	Company B
Equipment	$1,130,000	$900,000
Accumulated Depreciation	(730,000)	(500,000)
Book Value	$ 400,000	$400,000

Maxie Smith, a student who has had no accounting courses, remarks that Company A and Company B have the same amount of equipment.

Required

In a short paragraph, explain to Maxie that the two companies do not have equal amounts of equipment. You may want to include in your discussion comments regarding the possible age of each company’s equipment, the impact of the historical cost concept on balance sheet information, and the impact of different depreciation methods on book value.