Question: On January 1 2014 Heinkel Corporation s balance sheet consisted of

On January 1, 2014, Heinkel Corporation’s balance sheet consisted of $900,000 in cash and $900,000 in equity. On this date, Heinkel began production of an electronic device for improving the sound quality of CDs. During 2014, Heinkel produced 100,000 devices at a unit cost of $12. These devices had a selling price of $20 each and were to be sold on account to various dealers in the northeastern United States. Commissions and other selling costs incurred at the time of sale were $1.00 per unit. During 2014, 2015, and 2016, the 100,000 units produced were sold and cash was collected as follows:

1. Calculate the amount of Heinkel’s net income each year, assuming that revenue and gross profit are recognized:
a. At the completion of production.
b. At the point of sale.
c. As cash is collected (installment method).
2. Prepare Heinkel’s journal entries for 2014 under each of the methods in requirement1.
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  • CreatedSeptember 10, 2014
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