Income Statement

1. Orders are received from customers in February and the pillows were delivered to the customers in March.

No revenue or expense for February.
A revenue will be reported in March when the goods are provided to customers.
An expense will be reported in March when inventory is used up.

2. Insurance coverage for the month of February was paid for in January.

Insurance expense:
The service was provided to the company in February.
When the service was paid for does not matter to the income statement.

3. Employees worked in February and will be paid the first week of March.

Salary expense: A service was provided to the company in February.
When the expense is paid does not matter to the income statement.

4. Equipment was purchased in February and was not used in February

No revenue or expense for February.
The asset was not used in February.
The equipment is an asset until it is used and becomes an expense.

5. Supplies were used in the month of February.

Supplies expense:
The asset, supplies, is used in February

6. The company paid for advertising in February that was run weekly in February.

Advertising expense:
The service was provided to the company in February

7. Pillows were shipped to customers in February. Customers paid for the
pillows in March.

Revenue (sales) and expense (cost of goods sold) in February.
Goods are provided to customers in February.
The asset inventory is used up when it is provided to customers in February.
Using up an asset is an expense.
When the cash is received from the customer does not matter to the income statement.

8. Executives traveled to visit key customers in March. The company paid for the
travel in February.

No expense in February.
The service was provided to the company in March.
When the service is paid for does not matter to the income statement.

9. The company sold equipment in February for more than it cost the company.
The cash from the sale was received in February.

The “gain” occurred in February when the equipment was sold.
Report on the February income statement.

10. The company sold investments in January for less than the investments cost the company. The cash from the sale was received in February.

The loss is reported on the January income statement when the sale occurs.
When the cash is received does not matter to the income statement.

A. New chairs are purchased for students in August. The chairs are used in classrooms in September.
The cost of using the asset, chairs is expensed in September.
3) An asset was used to provide to customers: Expense
The expense of using long-term physical assets is called depreciation expense.

B. The bookstore purchased and received books for classes in August.
4) None of the requirements were met and nothing is reported on the income statement
The books are assets. A revenue or expense has not yet occurred.
A revenue will be reported when the books are sold to customers and the expense of using the inventory will be reported at the same time the books are sold to customers

C. Books are sold to students in the bookstore in September.
1) Goods or services were provided to customers: Revenue (sales)
3) An asset was used to provide to customers: Expense (cost of goods sold)
The asset used was inventory

D. Faculty prepares for class in August and they are paid in September.
When cash is paid does not impact the income statement. Faculty work in August and the service provided in August is an August expense.
4) None of the requirements were met and nothing is reported on the income statement for September.
August expense. When cash is paid does not matter to the income statement.

E. The cleaning staff works to clean classrooms during September. The employees
are paid at the beginning of each month for work done in the previous month.
2) Services were provided to the company: Expense
When the cash is paid does not matter to the income statement.

F. Utility bills for the month of September are received and paid in October.
2) Services were provided to the company: Expense
When cash is paid does not matter to the income statement.

G. Students register and attend classes in September. Students pay monthly payments as part of a payment plan; ¼ of the total bill each month for 4 months.
1) Goods or services were provided to customers: Revenue
When cash is paid does not matter to the income statement.

H. The University purchases ten large boxes of copier paper that is put in the copy center.
The paper is an asset until the asset is used up and becomes an expense.
No expense is reported in September because the asset has not been used.
4) None of the requirements were met and nothing is reported on the income statement for September.

I. The career center employees work with employers that hire students in September.
2) Services were provided to the company: Expense

J. Insurance coverage was provided by the insurance company during September.
2) Services were provided to the company: Expense