Val Preza has a small furniture company he started in 2003. His clients, many of them friends, usually pay him in cash. His monthly expenses for his business are as follows: Rent $1000, Materials $2500, Wages $1000, and Heat/Utilities $250. In December, Val calculated his revenue to be $27,500.

One of his clients, Michelle Moore, made an arrangement with Val in December to pay him $3,000 cash for a table he will make in January. Val included the $3,000 in his calculation for the December revenue figure. He also calculated that 2% of his Rent, Materials, Wages, and Heat/Utilities expenses will be from Michelle's job and included these figures in the December financial statement.

Questions:

1. When should Val bill Michelle? Why? 2. Should Val have included the $3,000 in his December revenue figure? Why? What should his revenue be for December? 3. When should Val record his expenses for Michelle's table? Explain. 4. What should Val's expenses be for December? Expenses Previous December Less 2% of December Revised December Balance Balance Balance Rent Materials Wages Heat/Utilities 5. What should his Net Income (Loss) be for December? 6. What advice would you give Val for stating Revenue and Expenses properly? What GAAPs are involved in this advice