Luton Inc Exercise Strictly Confidential

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Luton Inc Exercise
Luton Inc. has a year end of December 31 2009.

For each of the following transactions, show which figure would be shown in:
Income statement
Cash
Prepayment
Accruals

Transactions:

1.   Purchased a one year software license for $6,000 on November 1 2009.

The payment was made in full on November 1, 2009.

2.   Paid $1,300 of interest expense on January 3, 2010.

Interest is to be paid monthly and is for loans outstanding as of the month of December, 2009.

3.   Sold a training contract to be delivered on January 31, 2010.

The course fee is $2,000 which will be payable 30 days after the course.
There is also a development fee of $5,000 payable at the same time as the course fee.
The development will be carried out in December 2009 and January 2010 and will equal work being done in b

Answers

Transaction 1 Dr Cr
Income statement
Cash
Prepayment
Accruals
- -

Transaction 2 Dr Cr
Income statement
Cash
Prepayment
Accruals
- -

Transaction 3 Dr Cr
Income statement
Cash
Prepayment
Accruals
- -
mber, 2009.

ual work being done in both months.