Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses. The income statement for three years on an accrual basis.

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Chapter 4, Problem 4.26.1MCE

To determine

Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The income statement for three years on an accrual basis.

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Revenue Recognition, Cash and Accrual Bases Hathaway Health Club sold three-year memberships at a reduced rate during its opening promotion. It sold 1,000 three-year nonrefundable memberships for $357 each. The club expects to sell 100 additional three-year memberships for $900 each over each of the next two years. Membership fees are paid when clients sign up. The club's bookkeeper has prepared the following income statement for the first year of business and projected income statements for Years 2 and 3.Cash-basis income statement: Year 1 Year 2 Year 3 Sales $357,000 $90,000 $90,000 Equipment* $102,000 $0 $0 Salaries and wages 49,310 49,310 49,310 Advertising 5,160 5,160 5,160 Rent and utilities 34,380 34,380 34,380 Net income (loss) $166,150 $1,150 $1,150 *Equipment was purchased at the beginning of year 1 for $102,000 and is expected to last for three years and then to be worth $1,020. Required: Convert the income statements for each of the three years to…

Revenue Recognition Melaney Parks purchased HealthPlus Fitness in January 2022. Melaney wanted to increase the size of the business by selling three-year memberships for $3,000, payable at the beginning of the membership period. The normal yearly membership fee is $1,500. Since few prospective members were expected to want to spend $3,000 at the beginning of the membership period, Melaney arranged for a local bank to provide a $3,000 installment loan to prospective members. By the end of 2022, 250 customers had purchased the three-year memberships using the loan provided by the bank. Melaney prepared her statement of earnings for 2022 and included $750,000 ($3,000 × 250 members) as revenue because the club had collected the entire amount in cash. Melaney's accountant objected to the inclusion of the entire $750,000. The accountant argued that the $750,000 should be recognized as revenue as the club provides services for these members during the membership period. Melaney countered with…

S (Revenue Recognition—Membership Fees) Midwest Health Club (MHC) offers 1-year memberships. Membership fees are due in full at the beginning of the individual membership period. As an incentive to new customers, MHC advertised that any customers not satisfied for any reason could receive a refund of the remaining portion of unused membership fees. As a result of this policy, Richard Nies, corporate controller, recognized revenue ratably over the life of the membership. MHC is inthe process of preparing its year-end financial statements. Rachel Avery, MHC’s treasurer, is concerned about the company’s lackluster performance this year. She reviews the financial statements Nies prepared and tells Nies to recognize membership revenue when the fees are received.InstructionsAnswer the following questions.(a) What are the ethical issues involved?(b) What should Nies do?

Answer 2

Question

Chapter 4, Problem 4.26.1MCE

To determine

Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The income statement for three years on an accrual basis.

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Answer 3

Question

Chapter 4, Problem 4.26.1MCE

To determine

Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The income statement for three years on an accrual basis.

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Answer 4

Question

Chapter 4, Problem 4.26.1MCE

To determine

Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The income statement for three years on an accrual basis.

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Answer 5

Chapter 4, Problem 4.26.1MCE

To determine

Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The income statement for three years on an accrual basis.

Answer 6

Chapter 4, Problem 4.26.1MCE

To determine

Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The income statement for three years on an accrual basis.

Answer 7

Chapter 4, Problem 4.26.1MCE

To determine

Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The income statement for three years on an accrual basis.

Answer 8

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Answer 11

Ch. 4 - Revenue Recognition The highway department...Ch. 4 - Prob. 4.2.1E Ch. 4 - Prob. 4.2.2E Ch. 4 - Prob. 4.2.3E Ch. 4 - Prob. 4.3E Ch. 4 - Prob. 4.4E Ch. 4 - Prob. 4.5E Ch. 4 - Prob. 4.6.1E Ch. 4 - Prob. 4.6.2E Ch. 4 - Prob. 4.6.3E

Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses. The income statement for three years on an accrual basis.

Solution Summary: The author explains that accrual basis accounting requires a number of adjustments at the end of the period.

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Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The income statement for three years on an accrual basis.

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Chapter 4 Solutions

Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses. The income statement for three years on an accrual basis.

Solution Summary: The author explains that accrual basis accounting requires a number of adjustments at the end of the period.

Videos

Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses. The income statement for three years on an accrual basis.

Want to see the full answer?

Chapter 4 Solutions

Introduction: Accrual basis accounting requires a number of adjustments at the end of the period. The adjustment is made for unearned revenue, accrued expenses, revenue received in advance and prepaid expenses.

The income statement for three years on an accrual basis.