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BIKE Company starts with $3,000 cash to finance its business plan of producing bike helmets using a simple assembly process. During the first month of business, the company signs sales con- tracts for 1,300 units (sales price of $9 per unit), produces 1,200 units (production cost of $7 per unit), ships 1,100 units, and collects in full for 900 units. Production costs are paid at the time of production. The company has only two other costs: (1) sales commissions of 10% of selling price when the company collects from the customer, and (2) shipping costs of $0.20 per unit paid at time of shipment. Selling price and all costs per unit have been constant and are likely to remain the same.
Required: Prepare comparative (side-by-side) balance sheets and income statements for the first month of BIKE Company for each of the following three alternatives:
(1) Revenue is recognized at the time of shipment. (2) Revenue is recognized at the time of collection. (3) Revenue is recognized at the time of production.
Sagot :
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