Diversified Industries manufactures sump-pumps. Its most popular product is called the Super Soaker, which costs $650 to manufacture and $200 to install. Diversified sells the Super Soaker directly to commercial customers for $1,300 a unit and will install the unit for an additional $250. Although the Super Soaker is its main source of revenue, Diversified also provides monthly maintenance services for the convenience of its customers, for an additional fee. Diversified outsources maintenance services at a cost of $8 an hour. Diversified also sells the Super Soaker to home improvement retailers for $1,100 a unit. Diversified had the following Super Soaker revenue arrangements during the first quarter of 20Y1:

Arrangement A: Diversified sold 40 Super Soakers to a major business in a flood-prone area for a negotiated contract price of $60,000. The Super Soakers are delivered and installed on February 1, 20Y1, and full payment is made. Diversified agreed to include installation and a 3-year monthly maintenance service in the contract price, in addition to the pumps. Diversified typically charges $15 per month per unit for the maintenance plan. The contractor spends 1 hour/month maintaining each unit.

Arrangement B: On March 25, Diversified delivered 400 Super Soakers to Lowes and received payment in full upon delivery. To encourage sales, Diversified offers Lowes customers a $150 mail-in rebate. Historically, similar rebates had a 50% redemption rate. By March 31, Diversified has not received any rebates. Diversified uses the expected value method.

FINANCIAL STATEMENTS

Using the following template, please show how the above arrangements impacted Diversifieds Statement of Cash Flows, Income Statement, and Balance Sheet for the first quarter of 20Y1. For the Balance Sheet, indicate cumulative changes to the Balance Sheet as a result of this transaction. These amounts will not necessarily equal the ending balances in the Balance Sheet accounts. If you have completed it correctly, you will use each line item. List account names or transaction descriptions in the first column and amounts in the other columns. Assume all transactions are for cash unless told otherwise. Some hints have been provided for you to assist you in completing the activity.

STATEMENT OF CASH FLOWS		ARRANGEMENT A		ARRANGEMENT B
Net Change in Cash Flow		$ 51,360		$ 440,000
INCOME STATEMENT		ARRANGEMENT A		ARRANGEMENT B
Gross Profit
Net Income		$ 10,719		$150,000
BALANCE SHEET		ARRANGEMENT A		ARRANGEMENT B
Cash
Super Soaker Inventory
Change in Assets		$ 25,360		$ 180,000
Changes in Liabilities & Equity		$ 25,360		$ 180,000