Revenue and Expense Recognition Two years ago, Darlene Darby opened a delivery service. Darlene reports the following accounts on her income statement:

Sales $69,000 Advertising Expense 3,500 Salaries Expense 39,000 Rent Expense 10,000 These amounts represent two years of revenue and expenses. Darlene asks you how she can tell how much of the income is from the fi rst year of business and how much is from the second year. She provides the following additional data:

a. Sales in the second year are double those of the fi rst year.

b. Advertising expense is for a $500 opening promotion and weekly ads in the newspaper.

c. Salaries represent one employee for the fi rst nine months and two employees for the remainder of the time. Each is paid the same salary. No raises have been granted.

d. Rent has not changed since the business opened.

Required Prepare income statements for Years 1 and 2.

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