Question

During its first year, the company spent approximately $300,000 to catch 500 crocodiles. Of these, 300 crocodiles were sold and shipped to customers at a selling price of $1,000 per crocodile. Shipping costs of $50 per crocodile were paid for during the year. Customers were given liberal credit terms and only $160,000 from an equivalent 200 customers was collected during the first year. Ms. La Femme estimated that as much as 20% of the sales price will be spent in collection costs and bad debts expenses. Prepare three income statements for the year assuming that revenue is to be recognized when: 1. Crocodiles have been caught (i.e. production complete). PLEASE SHOW STEPS

Income Statement

Sales (300 x @1000) = $300000

Less: Shipping Cost(300 x $50) = $15000

Collection Cost($300000 x 20%) = $60000 $75000

Net Income $225000

Is it correct or should it be for sales 500,000 since its the crocodiles caught (1000*500)

Answer 1

Income Statments

Sale (300x@1000)=$300000

Less: Shipping Cost(300 x $50) = $15000

Spent Cost on 300 Crocodiles= ($300000/500)x300

=$180000

Collection Cost of 300 Crocodile={($300000/500)x300 x 20%)}

={$180000x20%}

=$36000

Total Cost =$180000+$15000+$36000

=$231000

Net Income   = 300000- $231000

= $69,000