Question
I have answers for 2a. #1-3 ; need 2b. answered based on 2a.: 2b. What income would you report for 2008? Why? Support your answer
I have answers for 2a. #1-3; need 2b. answered based on 2a.: 2b. What income would you report for 2008? Why? Support your answer with reference to appropriate FASB's rules.
2.a.Prepare three income statements for the year assuming that revenue is to be recognized when:
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Crocodiles have been caught (i.e. production complete).
| Crocodiles have been caught | |
| Income Statements for Pet imports Inc for the year ended 31 Dec 2008 | |
| Particulars | Amount |
| Revenues | $500,000.00 |
| Less : cost of production (catching crocodiles) | -$300,000.00 |
| Gross Margin | $200,000.00 |
| Less : shipping costs per crocodile | -$25,000.00 |
| Less : collection costs & bad debts | -$100,000.00 |
| Less : monthly warehouse rent | -$24,000.00 |
| Less : monthly office rent | -$12,000.00 |
| Net income | $39,000.00 |
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Crocodiles have been sold and delivered
| Crocodiles have been sold and delivered | |
| Income Statements for Pet imports Inc for the year ended 31 Dec 2008 | |
| Particulars | Amount |
| Revenues | $300,000.00 |
| Less: cost of production (catching crocodiles) | -$180,000.00 |
| Gross Margin | $120,000.00 |
| Less: shipping costs per crocodile | -$15,000.00 |
| Less: collection costs & bad debts | -$60,000.00 |
| Less: monthly warehouse rent | -$24,000.00 |
| Less: monthly office rent | -$12,000.00 |
| Net income | $9,000.00 |
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Cash collections are complete
| Cash collections are complete | |
| Income Statements for Pet imports Inc for the year ended 31 Dec 2008 | |
| Particulars | Amount |
| Revenues | $200,000.00 |
| Less: cost of production (catching crocodiles) | -$120,000.00 |
| Gross Margin | $80,000.00 |
| Less: shipping costs per crocodile | -$10,000.00 |
| Less: collection costs & bad debts | -$40,000.00 |
| Less: monthly warehouse rent | -$24,000.00 |
| Less: monthly office rent | -$12,000.00 |
| Net income | -$6,000.00 |
2b. What income would you report for 2008? Why? Support your answer with reference to appropriate FASB's rules.
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Accounting Understanding And Practice
Authors: Robert Perks
4th Edition
0077139135, 978-0077139131
