Revenue Recognition Alternatives

Slattery Company was formed on January 1, 2013, to build a single product. The company issued no-par common stock on that date for $260,000 cash. The product costs $18 to make, all of which is paid in cash at the time of production. Slattery sells each unit of the product for $35 on credit and incurs sales commissions per unit of $3 cash. In 2013, Slattery produced 13,000 units, shipped 11,000 units, and received payment for 9,000 units.

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

Income Statement (2013)

Revenue

Cost of goods sole

Selling expense

Net Income

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

Cash

Accounts receivable

Inventory

Total

Common stock, no par

Retained earnings

Total

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

Revenue

Production expense

Selling expense

Net Income

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

Cash

Accounts receivable

Inventory

Total

Accured selling expenses

Common stock, no par

Retained earnings

c. Prepare the 201income statement under revenue recognition at the completion of the earnings process as cash is received. Required

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 cash is received. Required:

Cash

Prepaid selling expenses

Inventory

Total

Common stock, no par

Retained earnings

Total