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White Clouds Company was started on January 1, 2021. During its first year of operations, the company had a choice of accounting policies. The chief financial officer identified the following as possible alternatives and underlying assumptions/estimates for each (Click the icon to view the possible alternatives and underlying assumptions/estimates.) The following are the actual transactions for the first three years of operations: Possible alternatives and underlying assumptions/estimates E: (Click the loon to view the transactions.) Required Inventory valuation Bad debts Accounting policy set A FIFO 4% of sales 4 5% of sales Accounting policy set B Average cost Allowance: 10% of closing gross accounts receivable Allowance: An analysis of sales and repairs Warranties 1 X Begin by computing net income for 2021, 2022 and 2023 using Accounting Policy Set A Accounting Policy Set A 2021 2022 2023 Sales S 12,500,000' $ 15,000,000' $ 16,100,000 Cost of goods sold (4,500,000) (2,800,000) (3,200,000) Bad debts expense (500,000) (600,000) (644,000) Warranty expense (625,000) (750,000) (805,000) Depreciation expense (500,000) ) (500,000) ( (500,000) Other operating expenses (3,300,000) (3,700,000) (4,300,000) Net Income $ 3,075,000 $ 6,650,000 $ 5,651,000 Transactions Sales (all on accounts) Inventory purchases (paid immediately) Ending inventory value, FIFO Ending Inventory value, average cost Collections Amounts actually written off Warranties actually paid Estimated warranties payable ending balance based on aging analysis of sales Depreciation expense All other operating expenses (paid immediately) 2021 $ 12,500,000 $ 6,000,000 1,500,000 1,350,000 11,000,000 250,000 Now compute net income for 2021, 2022, and 2023 using Accounting Policy Set B. Accounting Policy Set B 2021 2022 2023 Sales $ 12,500,000 $ 15,000,000 $ 16,100,000 Cost of goods sold (4.650,000) (2,850,000) (3,000,000) Bad debts expense (375,000) (395,000) (974,000) Warranty expense (645,000) (745,000) (790,000) Depreciation expense (500.000) (500,000) (500,000) Other operating expenses (3.300.000) (3.700.000) (4,300,000) $ Net income 3.030,000 $ 6.810,000 $ 6,536,000 2022 2023 15,000,000 $ 16.100.000 3,000,000 3.400.000 1,700,000 1.900.000 1,500,000 1,900,000 14,200,000 11,310,000 350,000 550.000 450,000 512,000 590,000 868,000 350,000 295,000 500,000 500.000 500,000 3,700,000 3,300,000 4,300,000 ....... Print Print Done Help Me Solve This Calculator Get More Help estion Requirement b. What is the cumulative income for the three years for the two sets of accounting policies? What does this tell us about the closing balance sheet at the end of the third year? Accounting Policy Set A Accounting Policy Set B $ 16,376,000 $ 16,376,000 Cumulative net income for the three years Requirement c. What are the cumulative operating cash flows for the three years for both sets of accounting policies? Why are these cumulative cash flows the same for the two sets of policies? Accounting Policy Set A Accounting Policy Set B 11,498,000 $ 11,498,000 Cumulative operating cash flows for the three years Zip Winds Company was started on January 1, 2021. During its first year of operations, the company had a choice of accounting policies. The chief financial officer identified the following as possible alternatives and underlying assumptions/estimates for each. (Click the icon to view the possible alternatives and underlying assumptions/estimates.) The following are the actual transactions for the first three years of operations: (Click the icon to view the transactions.) Required Transactions S... Possible alternatives and underlying assumptions/estimates 2021 2022 2023 Accounting policy set A S 14,000,000 $ Inventory valuation Bad debts FIFO Accounting policy set B Average cost Allowance: 20% of closing gross accounts receivable Allowance: An analysis of sales and repairs 6,000,000 2.700.000 2.550.000 11,000,000 3% of sales 3% of sales 14,500,000 $ 15,900,000 4,500,000 5.000.000 2.800.000 2.850.000 2,650.000 2,850,000 Warranties 13,700,000 Sales (all on accounts) ) Inventory purchases (paid immediately) Ending inventory value, FIFO Ending inventory value, average cost Collections Amounts actually written off Warranties actually paid Estimated warranties payable ending balance based on aging analysis of sales Depreciation expense All other operating expenses (pald Immediately) 18,120,000 520.000 300,000 Print Done 240,000 200.000 450,000 450.000 175.000 511.000 131.000 500.000 500 ODD 500,000 3,900,000 3,400,000 4.400.000 Print Done