X Inc and Y Inc T

question 8

Essay

X Inc. and Y Inc. are virtually identical companies with identical cost structures and very similar business practices operating in the same lines of business. X Inc. is a public company based in Canada and follows IFRS while Y Inc. is a private enterprise based in Canada and follows ASPE. The following were the condensed income statements for both companies for the last year before both adopted IFRS.
Required:
Given the information provided, what are some possible causes for the differing results of these companies?
$$\begin{array} { | l | l | l | } \hline &\text {X Inc: } & \text { Y Inc. } \\\hline \text { Sales: } & \$ 1,000,000 & \$ 2,000,000 \\\hline \text { Less: } & & \\\hline \text { Cost of Goods Sold } & \$ 500,000 & \$ 1,600,000 \\\hline \text { Gross Margin } & \$ 500,000 & \$ 400,000 \\\hline \text { Administrative Expenses } & \$ 200,000 & \$ 300,000 \\\hline & & \\\hline \text { Net Income: } & \$ 300,000 & \$ 100,000 \\\hline\end{array}$$ T

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Definitions:

Biotechnology

The use of living systems and organisms to develop or make products, or any technological application that uses biological systems, living organisms, or derivatives thereof.

Military Technology

Technology developed and used by the armed forces to gain advantage in warfare.

Normal Accidents

A concept proposing that in complex systems, accidents are inevitable due to the unforeseeable interaction of multiple failures.

Technological Determinism

The theory that society's technology drives the development of its social structure and cultural values.