Data Table Morning Dews Company was started on January 1, 2018. During its first year of operations, the company had underlying assumptionslestimates 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.) 2018 2019 2020 S 13,000 000 $ 14.000.000 $ 15,000,000 4600.000 3.000.000 3.300.000 Required 2.025 000 2.075.000 2,275,000 1.875,000 2.275.000 175.000 12.000.000 150.000 13 000 000 12,490,000 Sales (all on account) 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 balande based on aging analysis of sales Depreciation expense All other operating expenses paid inimediately 190.000 550 000 550.000 Now compute net income for 2018.2019 and 2020 using Accounting Policy Set B Accounting Policy Set B 2018 2019 2020 Sales 13000000 14000000 15000000 Cost of goods sold Bad debts expense Warranty expense Depreciation expense Other operating expenses 614.000 460 000 570 000 643.000 776.000 800 000 800.000 800.000 2.500 000 2.500.000 3 100.000 Net Income Requirement b. What is the cumulative income for the three years for the two sets of accounting policies? W Accounting Peicy Ser A Accounting Policy Seub Pint Done More Info Accounting policy Accounting policy set A set B Inventory valuation FIFO Bad debts 3% of sales Average cost Allowance: 10% of closing accounts receivable Allowance an analysis of sales and repairs Warranties 5% of sales Print Done Requirement b. What is the cumulative income for the three years for the two sets of accounting policies? What c Accounting Policy Set A Accounting Policy Set B Cumulative net income for the three years What does the cumulative net income amounts tell us about the closing balance sheet at the end of the third year? Cumulative net income for the three years is the same for both situations. This tells us that the balance sheet accou Requirement c. What are the cumulative operating cash flows for the three years for either sets of accounting policies Accounting Policy SetA Accounting Policy Set B Cumulative operating cash flows for the three years Why are these cumulative cash flows the same for the two sets of policies? This amount is the same for both set of policies because the difference in the asset balances between the two policies at Requirement a. Derive net income for 2018, 2019, and 2020. Ignore income taxes Begin by computing net income for 2018, 2019, and 2020 using Accounting Policy Set A Accounting Policy Set A 2018 2019 Sales 13000000 14000000 15000000 Cost of goods sold Bad debts expense (390000 (420000 450000 (750000) (650000) (700000 Warranty expense Depreciation expense Other operating expenses 1800000 12500000 0286 Net income Now compute net income for 2018 2019 and 2020 using Accounting Policy Set B Data Table Morning Dews Company was started on January 1, 2018. During its first year of operations, the company had underlying assumptionslestimates 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.) 2018 2019 2020 S 13,000 000 $ 14.000.000 $ 15,000,000 4600.000 3.000.000 3.300.000 Required 2.025 000 2.075.000 2,275,000 1.875,000 2.275.000 175.000 12.000.000 150.000 13 000 000 12,490,000 Sales (all on account) 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 balande based on aging analysis of sales Depreciation expense All other operating expenses paid inimediately 190.000 550 000 550.000 Now compute net income for 2018.2019 and 2020 using Accounting Policy Set B Accounting Policy Set B 2018 2019 2020 Sales 13000000 14000000 15000000 Cost of goods sold Bad debts expense Warranty expense Depreciation expense Other operating expenses 614.000 460 000 570 000 643.000 776.000 800 000 800.000 800.000 2.500 000 2.500.000 3 100.000 Net Income Requirement b. What is the cumulative income for the three years for the two sets of accounting policies? W Accounting Peicy Ser A Accounting Policy Seub Pint Done More Info Accounting policy Accounting policy set A set B Inventory valuation FIFO Bad debts 3% of sales Average cost Allowance: 10% of closing accounts receivable Allowance an analysis of sales and repairs Warranties 5% of sales Print Done Requirement b. What is the cumulative income for the three years for the two sets of accounting policies? What c Accounting Policy Set A Accounting Policy Set B Cumulative net income for the three years What does the cumulative net income amounts tell us about the closing balance sheet at the end of the third year? Cumulative net income for the three years is the same for both situations. This tells us that the balance sheet accou Requirement c. What are the cumulative operating cash flows for the three years for either sets of accounting policies Accounting Policy SetA Accounting Policy Set B Cumulative operating cash flows for the three years Why are these cumulative cash flows the same for the two sets of policies? This amount is the same for both set of policies because the difference in the asset balances between the two policies at Requirement a. Derive net income for 2018, 2019, and 2020. Ignore income taxes Begin by computing net income for 2018, 2019, and 2020 using Accounting Policy Set A Accounting Policy Set A 2018 2019 Sales 13000000 14000000 15000000 Cost of goods sold Bad debts expense (390000 (420000 450000 (750000) (650000) (700000 Warranty expense Depreciation expense Other operating expenses 1800000 12500000 0286 Net income Now compute net income for 2018 2019 and 2020 using Accounting Policy Set B