Amortization and Cash Flow Book Company’s only asset as of January 1, 2010, was a copyright. During 2010, only the following three transactions occurred:

Royalties earned from copyright use, $500,000 in cash Cash paid for advertising and salaries, $62,500 Amortization, $50,000 Required 1. What amount of income will Book report in 2010?

2. What is the amount of cash on hand at December 31, 2010?

3. Explain how the cash balance increased from zero at the beginning of the year to its year-end balance. Why does the increase in cash not equal the income?

AppendixLO1