Luton Inc.

- solution

1. Income statement (1,000)

Cash (6,000)
Prepayment 5,000
(1,000) (1,000)

2. Income statement (10,000)

Cash -
Accrual 10,000
- -

3. Income statement 2,500

Cash -
Prepayment (and accrued income) 2,500 -
Accruals (and deferred income) - -
2,500 2,500

Corporate Finance Institute 33840 1