GIVEN:

(Warehouse: Monthly rent $3,000 Balance of the lease 24 months Total rent for warehouse 72,000 Office space: Monthly rent 1,500 Balance of the Lease 24 months Total rent for warehouse 36,000 TOTAL RENT 108,000)

(During its first year, the company spent approximately $390,000 to catch 600 crocodiles. Of these, 400 crocodiles were 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 300 customers were 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.)

Assume that you have been hired as a consultant by Mary Grace to help her and Omar Daniel. She has asked you for your help on the GAAP income statements and the legal issues arising from the lease cancellation. Please write a business report for Ms. Grace using the case writing guidelines and report format guide from the Gateway website. Please incorporate material regarding the following questions: Question 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 FASB's rules.