Interperiod Accounting Relationships:

Nickee Company has reported a profit in each of its first three years of operations. The firms reported income numbers are shown below at the top of each of the three columns for those first three years. The information contained in these three paragraphs has been discovered after the financials for all three years have been published.

Nickee signed a retail space rental agreement covering three years starting February 16, Year 1. Nickee moved in that same day. The agreement required three equal annual rental payments be made on three dates: February 16 in Years 2, 3 and 4. The monthly rental amount was $300. In all three years, Nickee consistently recorded Rent Expense equal to the amount of cash paid in each of those three years.

Nickee bought $500 of Supplies for Cash on June 1, Year 1. Nickee treated all of these as Supplies Expense for Year 1 even though $100 of these were still on hand at the end of Year 1. Nickee treated all Supplies purchased in Year 2 as Supplies Expense in Year 2. There were no Supplies on hand at the end of Year 2.

Nickee rented a storage facility for two years and began using the facility on March 31, Year 2. On March 31, Year 2, Nickee made a one-time payment of $480 to cover the entire two-year period. Nickee treated all of the facilitys cost as an expense in Year 2.

Year: Year 1 Year 2 Year 3

Income $8,000 $7,000 $9,000

______ ______ ______

______ ______ ______

______ ______ ______

Required: Analyze the effects, if any, which corrections based on this information would have on the incomes reported in each of the three years. Indicate whether the information contained in each of the three numbered paragraphs above would make the income in each of the three years larger or smaller. For example, if the information in paragraph would have made income smaller in Year 1 by $10 but larger in Year 2 by the same amount, please show a -$10 in the Year 1 column for paragraph A and a +$10 in the Year 2 column. Ignore taxes throughout this exercise.