Cash-basis income statements:
Sales
Year 1 Year 2 Year 3
$366,000 $90,000 $90,000
Equipment*
$100,000 $0 $0
Salaries and wages
50,000 50,000 50,000
Advertising
5,000 5,000 5,000
Rent and utilities
36,000 36,000 36,000
Net income (loss)
$175,000 $(1,000) $(1,000)
* Equipment was purchased at the beginning of Year 1 for $100,000 and is expected to last for three years and then to be worth $1,000.
Required:
1. Convert the income statements for each of the three years to the accrual basis. Indicate a net loss with a minus sign.
Hathaway Health Club
Income Statements
Sales
Expenses:
Depreciation
Salaries and wages
Advertising
Rent and utilities
Total expenses
Net income (loss)
Year 1 Year 2 Year 3
