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EH inc. sells appliances to Glenn's Department Store. A recent order requires EH to manufacture and deliver 500 toasters at a price of $100 per
EH inc. sells appliances to Glenn's Department Store. A recent order requires EH to manufacture and deliver 500 toasters at a price of $100 per unit. EH's manufacturing costs are approximately $40 per unit. At the end of Year 3, they order is completed and all payments and collections in cash are made. The following schedule summarizes the production and delivery record of EH, as of the end of Year 3: Year 1 2 3 Total Toasters produced 200 200 100 500 Costs incurred $8,000 $8,000 $4,000 $20,000 Cash paid out $6,000 $9,000 $5,000 $20,000 Toasters delivered 150 200 150 500 Cash received $10,000 $15,000 $25,000 $50,000 Required: a. Assuming EH recognizes revenue at delivery, how much revenues and expenses, and the resulting income, should be recognized in each of the three years? (remember that you need to record the expenses associated with revenues, which is based on the number of units delivered) b. Assuming EH uses cash based accounting, build an income statement in each of the three years? c. Compare the total income over the three years combined, under the alternative systems described above (a-b), and explain your findings
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