Computer Needs Limited was started in early 2016 and continued to operate until early 2019, when it was wound up due to disputes between the two principal owners. When it started, the company considered two sets of accounting policies: (Click the icon to view accounting policy set 1.) (Click the icon to view accounting policy set 2.) Actual events, cash flows, and transactions are as follows: E(Click the icon to view the data.) Required TO Requirement a. Derive net income for 2016 to 2019 using the first set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. (Enter a "0" for any zero balances.) 2016 2017 2018 2019 Sales Operating expenses Warranty expense Bad debt expense Depreciation expense Gain on disposal Sluered two sets of accounting pol ito sh Accounting policy set 1 X at a. Use straight-line depreciation method on the firm's only asset. The computer cost $1,200,000 and has an estimated useful life of four years. Del TE ad b. Estimate warranty expense as 9% of sales. C. Estimate bad debts expense as 6% of sales a hd seg Print Done se se Accounting policy set 2 X a. Use 50% declining-balance method for depreciation. b. Estimate warranty expense as 10% of sales. C. The year-end allowance for doubtful accounts should be 40% of gross accounts receivable. Print Done Data Table x 2019 750,000 270,000 2016 2017 2018 Sales (all on account) $ 3,300,000 S 3,700,000 $4,200,000 $ Warranties paid 264.000 296,000 430,500 Proceeds on disposal of computer Accounts receivable collected in year 2,871,000 2,960,000 3,990,000 Accounts receivable written off in year 99.000 111,000 210,000 All other expenses (paid in cash in year incurred) 2,310,000 2,590,000 2,835,000 400.000 1,409,000 300,000 525,000 Print Done Required a. Derive net income for 2016 to 2019 using the first set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. b. Derive net income for 2016 to 2019 using the second set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0 as the firm wound itself up during the year and all timing differences have been resolved. c. Derive the annual net cash flows for 2016 to 2019. d. What is the sum of the net income for the four years for the two sets of accounting policies? What is the sum of the net cash flows for the four years? What does this tell us about net income and accrual accounting? e. Why were the net incomes different between the two sets of accounting policies? f. What caused the net income in 2019 to be so high for the second set of accounting policies? Elf 19 Print Done Requirement a. Derive net income for 2016 to 2019 using the first set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. (Enter a "0" for any zero balances) 2016 2017 2018 2019 Sales Operating expenses Warranty expense Bad debt expense Depreciation expense Gain on disposal Net income Requirement b. Derive net income for 2016 to 2019 using the second set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0 as the firm wound itself up during the year and all timing differences have been resolved. (Use a minus sign or parentheses for a loss Enter a "0" for any zero balances.) 2016 2017 2018 2019 Sales Operating expenses Warranty expense Bad debt expense or recovery Depreciation expense Gain on disposal Net income (loss) Requirement c. Derive the annual net cash flows for 2016 to 2019 Begin by calculating the annual net cash flow for 2016, and then for 2017, 2018, and 2019. (Use a minus sign or parentheses for a cash outflow. Enter a "0" for any zero balances) 2016 2017 2018 2019 Collections Cash operating expenses Warranty expense paid Purchase of capital asset Proceeds on disposal of capital asset Net cash flow Requirement d. What is the sum of the net income for the four years for the two sets of accounting policies? What is the sum of the net cash flows for the four years? What does this tell us about net income and accrual accounting? Compare the 4-year totals for cash flow and income. Comment on the similarities and differences. Sum of the net income over four years using accounting policy set 1: Sum of the net income over four years using accounting policy set 2: Sum of the net cash flows over four years What does this tell us about net income and accrual accounting? These sums show that, from a company's beginning to its end (cradle to grave), the sum of net income and cash flows Requirement e. Why were the net incomes different between the two sets of accounting policies? The differences in net incomes for the two scenarios is the result of using different methods of accruing When it was wound up due to Requirement d. What is the sum of the net income for the four years for the two sets of accounting policies? What is the sum of the net cash flows for the four years? What does this tell us about net income and accrual accounting? Compare the 4-year totals for cash flow and income. Comment on the similarities and differences. Sum of the net income over four years using accounting policy set 1 Sum of the net income over four years using accounting policy set 2. Sum of the net cash flows over four years, What does this tell us about net income and accrual accounting? These sums show that, from a company's beginning to its end (cradle to grave), the sum of net income and cash flows incomes different between the two sets of accounting policies? he two scenarios is the result of using different methods of accruing must be equal will always be different et income in 2019 to be so high for the second set of accounting policies? The net income for 2019 is significantly higher using accounting policy set 2 than set 1. This is due to the fact that the first set of accounting nolicies recorded This means in later veare and when the firm was wound Requirement e. Why were the net incomes different between the two sets of accounting policies? The differences in net incomes for the two scenarios is the result of using different methods of accruing Requirement f. What caused the net income in 2019 to be so high for the second set of accounting policies? The net income for 2019 is significantly higher using accounting policy set 2 than set 1. This is due to the fact that the first set of accounting policies recorded This means in later years and when the firm was wound up must be reversed Requirement e. Why were the net incomes different between the two sets of accounting policies? The differences in net incomes for the two scenarios is the result of using different methods of accruing he second set of accounting policies? revenue, bad debt, and operating expenses. et 2 than set 1. This is due to the fact that the first This means in later years and when the firm wa warranty, bad debt and depreciation expense. warranty, revenue and the proceeds on the asset disposal Olicy SE ents, cash flows, and transactions are as follows: k the icon to view the data.) . ums show that, from a company's beginning to its end (cradle to grave), the sum of net income and ment e. Why were the net incomes different between the two sets of accounting policies? erences in net incomes for the two scenarios is the result of using different methods of accruing ement f. What caused the net income in 2019 to be so high for the second set of accounting policies? income for 2019 is significantly higher using accounting policy set 2 than set 1. This is due to the fact ting policies recorded This means in later years and wher 5 much higher expenses in the earlier years much lower expenses in the earlier years. Requirement e. Why were the net incomes different between the two sets of accounting The s the result of using different method Req that this overstatement of expenses to be so high for the second set of ac The that this understatement of expenses accounting policy set 2 than set 1. Thi This means in la accc up must be reversed Show Uld Mom a company's beginning to its end (cradle to grave), the sum of net income and cash flows Renuiremente Why were the net incomes different between the two sets of accounting policies? so the total expenses using accounting policy set 1 will be greater than the total expenses using accounting policy set 2 so the total expenses using accounting policy set 2 will be greater than the total expenses using accounting policy set 1. such that the total of all the expenses for any type of expense is the same Computer Needs Limited was started in early 2016 and continued to operate until early 2019, when it was wound up due to disputes between the two principal owners. When it started, the company considered two sets of accounting policies: (Click the icon to view accounting policy set 1.) (Click the icon to view accounting policy set 2.) Actual events, cash flows, and transactions are as follows: E(Click the icon to view the data.) Required TO Requirement a. Derive net income for 2016 to 2019 using the first set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. (Enter a "0" for any zero balances.) 2016 2017 2018 2019 Sales Operating expenses Warranty expense Bad debt expense Depreciation expense Gain on disposal Sluered two sets of accounting pol ito sh Accounting policy set 1 X at a. Use straight-line depreciation method on the firm's only asset. The computer cost $1,200,000 and has an estimated useful life of four years. Del TE ad b. Estimate warranty expense as 9% of sales. C. Estimate bad debts expense as 6% of sales a hd seg Print Done se se Accounting policy set 2 X a. Use 50% declining-balance method for depreciation. b. Estimate warranty expense as 10% of sales. C. The year-end allowance for doubtful accounts should be 40% of gross accounts receivable. Print Done Data Table x 2019 750,000 270,000 2016 2017 2018 Sales (all on account) $ 3,300,000 S 3,700,000 $4,200,000 $ Warranties paid 264.000 296,000 430,500 Proceeds on disposal of computer Accounts receivable collected in year 2,871,000 2,960,000 3,990,000 Accounts receivable written off in year 99.000 111,000 210,000 All other expenses (paid in cash in year incurred) 2,310,000 2,590,000 2,835,000 400.000 1,409,000 300,000 525,000 Print Done Required a. Derive net income for 2016 to 2019 using the first set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. b. Derive net income for 2016 to 2019 using the second set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0 as the firm wound itself up during the year and all timing differences have been resolved. c. Derive the annual net cash flows for 2016 to 2019. d. What is the sum of the net income for the four years for the two sets of accounting policies? What is the sum of the net cash flows for the four years? What does this tell us about net income and accrual accounting? e. Why were the net incomes different between the two sets of accounting policies? f. What caused the net income in 2019 to be so high for the second set of accounting policies? Elf 19 Print Done Requirement a. Derive net income for 2016 to 2019 using the first set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0, as the firm wound itself up during the year and all timing differences have been resolved. (Enter a "0" for any zero balances) 2016 2017 2018 2019 Sales Operating expenses Warranty expense Bad debt expense Depreciation expense Gain on disposal Net income Requirement b. Derive net income for 2016 to 2019 using the second set of accounting policies. For the year-end balance for 2019, assume accounts receivable, allowance for doubtful accounts, and the warranty accrual are $0 as the firm wound itself up during the year and all timing differences have been resolved. (Use a minus sign or parentheses for a loss Enter a "0" for any zero balances.) 2016 2017 2018 2019 Sales Operating expenses Warranty expense Bad debt expense or recovery Depreciation expense Gain on disposal Net income (loss) Requirement c. Derive the annual net cash flows for 2016 to 2019 Begin by calculating the annual net cash flow for 2016, and then for 2017, 2018, and 2019. (Use a minus sign or parentheses for a cash outflow. Enter a "0" for any zero balances) 2016 2017 2018 2019 Collections Cash operating expenses Warranty expense paid Purchase of capital asset Proceeds on disposal of capital asset Net cash flow Requirement d. What is the sum of the net income for the four years for the two sets of accounting policies? What is the sum of the net cash flows for the four years? What does this tell us about net income and accrual accounting? Compare the 4-year totals for cash flow and income. Comment on the similarities and differences. Sum of the net income over four years using accounting policy set 1: Sum of the net income over four years using accounting policy set 2: Sum of the net cash flows over four years What does this tell us about net income and accrual accounting? These sums show that, from a company's beginning to its end (cradle to grave), the sum of net income and cash flows Requirement e. Why were the net incomes different between the two sets of accounting policies? The differences in net incomes for the two scenarios is the result of using different methods of accruing When it was wound up due to Requirement d. What is the sum of the net income for the four years for the two sets of accounting policies? What is the sum of the net cash flows for the four years? What does this tell us about net income and accrual accounting? Compare the 4-year totals for cash flow and income. Comment on the similarities and differences. Sum of the net income over four years using accounting policy set 1 Sum of the net income over four years using accounting policy set 2. Sum of the net cash flows over four years, What does this tell us about net income and accrual accounting? These sums show that, from a company's beginning to its end (cradle to grave), the sum of net income and cash flows incomes different between the two sets of accounting policies? he two scenarios is the result of using different methods of accruing must be equal will always be different et income in 2019 to be so high for the second set of accounting policies? The net income for 2019 is significantly higher using accounting policy set 2 than set 1. This is due to the fact that the first set of accounting nolicies recorded This means in later veare and when the firm was wound Requirement e. Why were the net incomes different between the two sets of accounting policies? The differences in net incomes for the two scenarios is the result of using different methods of accruing Requirement f. What caused the net income in 2019 to be so high for the second set of accounting policies? The net income for 2019 is significantly higher using accounting policy set 2 than set 1. This is due to the fact that the first set of accounting policies recorded This means in later years and when the firm was wound up must be reversed Requirement e. Why were the net incomes different between the two sets of accounting policies? The differences in net incomes for the two scenarios is the result of using different methods of accruing he second set of accounting policies? revenue, bad debt, and operating expenses. et 2 than set 1. This is due to the fact that the first This means in later years and when the firm wa warranty, bad debt and depreciation expense. warranty, revenue and the proceeds on the asset disposal Olicy SE ents, cash flows, and transactions are as follows: k the icon to view the data.) . ums show that, from a company's beginning to its end (cradle to grave), the sum of net income and ment e. Why were the net incomes different between the two sets of accounting policies? erences in net incomes for the two scenarios is the result of using different methods of accruing ement f. What caused the net income in 2019 to be so high for the second set of accounting policies? income for 2019 is significantly higher using accounting policy set 2 than set 1. This is due to the fact ting policies recorded This means in later years and wher 5 much higher expenses in the earlier years much lower expenses in the earlier years. Requirement e. Why were the net incomes different between the two sets of accounting The s the result of using different method Req that this overstatement of expenses to be so high for the second set of ac The that this understatement of expenses accounting policy set 2 than set 1. Thi This means in la accc up must be reversed Show Uld Mom a company's beginning to its end (cradle to grave), the sum of net income and cash flows Renuiremente Why were the net incomes different between the two sets of accounting policies? so the total expenses using accounting policy set 1 will be greater than the total expenses using accounting policy set 2 so the total expenses using accounting policy set 2 will be greater than the total expenses using accounting policy set 1. such that the total of all the expenses for any type of expense is the same