Point-of-sale versus installment method of income recognition. The J. C. Spangle catalog division began business on January 1, Year 8. Activities of the company for the first two years are as follows:

a. Prepare income statements for Year 8 and Year 9, assuming that the company uses the accrual basis of accounting and recognizes revenue at the time of sale.

b. Prepare income statements for Year 8 and Year 9, assuming that the company uses the accrual basis of accounting and recognizes revenue at the time of cash collection following the installment method of accounting. "All Expenses Other Than Merchandise, Paid in Cash" are period expenses.

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Year 8 Year 9 Sales, All on Account Collections from Customers: On Year 8 Sales .... $200,000 $300,000 90,000 110,000 On Year 9 Sales .. 120,000 Purchase of Merchandise 180,000 240,000 Inventory of Merchandise at 12/31 60,000 114,000 All Expenses Other Than Merchandise, Paid in Cash 32,000 44,000