Installment Basis versus Point-of-Sale Revenue Recognition The Apollo Company is a catalogue-based retailer. The following describes Apollo's operations: Year 1 Year 2 $600,000 $900,000 Sales (all on account) Cash collections from customers On Year 1 sales 270,000 330,000 On Year 2 sales 360,000 Cash purchases of merchandise inventory 540,000 720,000 Merchandise inventory-on-hand (year-end) 180,000 342,000 Operating expenses (other than inventory) 96,000 132,000 Required 1. Prepare an income statement for each year assuming that Apollo recognizes revenue using the point-of-sale method and assuming that all operating expenses are paid in cash. Enter all numbers as positive numbers. Year 1 Year 2 Revenues $ 600,000 $ 900,000 0 Less: Cost of goods sold Beg. Inventory Add: Purchases Less: End. Inventory Cost of Goods Sold 540,000 180,000 720,000 (342,000) * (558,000) * 342,000 (132,000) * 210,000 (180,000) * (360,000) * 240,000 (96,000) * 144,000 Gross margin Less: Operating expenses Net income $ $ 2. Prepare an income statement for each year assuming that Apollo recognizes revenue using the installment method and assuming that all operating expenses are paid in cash. Enter all numbers as positive numbers. Year 2 Revenues $ $ 690,000 0 x Less: Cost of goods sold Gross margin Less: Operating expens Year 1 270,000 (162,000) * 108,000 (96,000) * 12,000 0 x (132,000) x 136,800 Net income $ $