Hathaway Health Club sold three-year memberships at a reduced rate during its opening promotion. It sold 1,000 three-year nonrefundable memberships for $357 each. The club expects to sell 100 additional three-year memberships for $900 each over each of the next two years. Membership fees are paid when clients sign up. The club's bookkeeper has prepared the following income statement for the first year of business and projected income statements for Years 2 and 3.

Cash-basis income statement:

Year 1 Year 2 Year 3

Sales $357,000 $90,000 $90,000

Equipment* $106,000 $0 $0

Salaries and wages 49,000 49,000 49,000

Advertising 4,810 4,810 4,810

Rent and utilities 35,020 35,020 35,020

Net income (loss) $162,170 $1,170 $1,170

*Equipment was purchased at the beginning of year 1 for $106,000 and is expected to last for three years and then to be worth $1,060.

Required:

Convert the income statements for each of the three years to the accrual basis. Indicate a net loss with a minus sign.

Hathaway Health Club

Income Statements

Year 1 Year 2 Year 3

Sales $ $ $

Expenses:

Depreciation $ $ $

Salaries and wages

Advertising

Rent and utilities

Total expenses $ $ $

Net income (loss) $ $ $