Directions: Fill in the Cash Basis Income Statement and the Accrual Basis Income Statement given the transactions below. Use a separate line item on the statements for each transaction. If a transaction does not lead to a revenue or an expense do not put anything on the income statement. The accounting period ends on December 31. Show revenues as positives and expenses as negatives in the spreadsheet. The 2 spreadsheet is set up to calculate net income for each year as revenues minus expenses. 3 4 Transactions: 1 5 24 6 2 3 247 24 la 2 In January of Year 1, Hicks Company signed a contract for $720,000 to provide consulting services evenly over a 3 year period. They received one-half of the payment up front and will receive the remainder at the completion of the contract. Hicks owns land that has increased in value by $5,000. Hicks spent $5,000 in Year 1, $6,000 in Year 2, and $7,000 in Year 3 on research that they hope will lead to better consulting processes. Hicks signed a three-year lease on office space for $6,000 per year. They were required to pay the entire amount up front. Hicks ran an advertising campaign in Year 1 for $5,000. They paid for the advertising in Year 2 Hicks purchased $21,000 of computer equipment and paid for it in Year 1. The computer equipment is expected to last for 3 years. 4 9 5 5.82 9 10 6 Employee salaries for work they completed in Year 1 was $8,000, for Year 2 $10,000, for Year 3 $12,000. Hicks paid Year 1 salaries on December 29 of Year 1, Year 2 salaries on January 2 of Year 3, and Year 3 salaries on December 30 of Year 3. 7 3. 0 11 1 12 3.2 300 Cash Basis Income Statement Year 1 Cash Basis Income Statement Year 2 Cash Basis Income Statement Year 3 30 13 14 12-15 Consulting Revenue 23.07 16 17 18 R&D 19 Rent - 20 Advertising 45.71 21 Computer Equipment 4573 22 Salaries 46.12 23 Net Income 24 Accrual Basis Income Statement Year 1 Accrual Basis Income Statement Year 2 Accrual Basis Income Statement Year 3 25 26 27 Consulting Revenue 28 29 30 R&D 31 Rent 32 Advertising 33 Depreciation 34 Salaries 35 Net Income 36