P1-55A. (Learning Objectives 1, 2, 4: Applying accounting vocabulary, concepts, and principles; evaluating business operations) Assume that Division A of Smith Corporation experienced the following transactions during the year ended December 31, 20X7:

a. Suppose Division A supplied copy products to a customer at a discounted price of

$250,000. Under normal conditions they would have provided these services for

$305,000.

b. The customer paid $102,000 in December 20X7, and the balance was paid in full in January 20X8.

c. During the period, Division A also sold some products to Division B amounting to

$55,000 at a cost of $32,000.

d. Division A discovered that the remaining useful life of its equipment is three years instead of two years. This resulted in a lower depreciation expense of $3,000 for the year

(instead of $5,000).

e. All other expenses totaled $245,000 for the year, but only $217,000 was paid to employees and suppliers.

Requirements 1. Prepare the Division A’s Income Statement for the year ended December 31, 20X7.

2. For items a through

e, identify the accounting concept, assumption, or principle that provides guidance in accounting for the item. State how you have applied the concept or principle in preparing the Income Statement.