During its first year, the company spent approximately $390,000 to catch 600 crocodiles. Of

these, 400 crocodile was sold and shipped to customers at a selling price of $1,250 per

crocodile. Shipping costs of $100 per crocodile were paid for during the year. Customers were

given liberal credit terms and only $300,000 from an equivalent of 300 customers was

collected during the first year. Ms. Grace estimated that as much as 20% of the sales price will

be spent on collection costs and bad debts expenses.

a. Prepare three income statements for the year assuming that revenue is to be recognized

when:

1. Crocodiles have been caught (i.e. production complete).

2. Crocodiles have been sold and delivered

3. Cash collections are complete

b. What income would you report for 2008? Why? Support your answer with reference to

appropriate FAB's rules.