Revenue Recognition Alternatives

Slattery company was formed on January 1, 2013, to build a single product. The company issued no-par common strock on that date for $280,000 cash. The product costs $14 to make, all of which is paid in cash at the time of production. Slattery sells each unit of the product for $34 on credit and incurs sales commissions per unit of $4 cash. In 2013, Slattery produced 8,000 units, shipped 6,000 units, and received payment for 5,000 units.

1. Prepare the 2013 income statement under the revenue recognition at the completion of the earnings process.

SLATTERY COMPANY

Income Statement

For year Ended December 31, 2013

Revenue

Cost of goods sold

Selling expense

Net Income

Prepare the 2013 ending balance sheet under revenue recognition at the completion of the earnings process.

SLATTERY COMPANY

Balance Sheet

December 31,2013

Cash

Accounts receivable

Inventory

Common stock, no par

Retained earnings

1b. Prepare the 2013 income statement under revenue recognition prior to the completion of the earnings process.

SLATTERY COMPANY

Income Statement

For year Ended December 31,2013

Revenue

Production expense

Selling expense

Net Income

2b. Prepare the 2013 ending balance sheet under revenue recognition prior to the completion of the earnings process.

SLATTERY COMPANY

Balance Sheet

December 31, 2013

Cash

Accounts receivable

Inventory $

Accrued Selling expenses $

common stock, no par $

retained earnings

c. Prepare the 2013 income statement under revenue recognition at the completion of the earnings precess as cash is received.

SLATTERY COMPANY

Income statement

For Year Ended December 31,2013

Revenue

Cost of goods sold

Selling expense

Net Income

Prepare the 2013 ending balance sheet under revenue recognition at the completion of the earnings process as casn is received.

SLATTERY COMPANY

Balance Sheet

December 31, 2013

Cash

Prepaid selling expenses

Inventory

common stock,no par

Retained earnings