Listed below are five terms followed by a list of phrases that describe or characterize
each of the terms. Match each phrase with the number for the most correct term.
Briefly explain why the income statement is referred to as a change statement.
Assume that a customer enrolls in AAA’s Premier Membership, which provides 12
months of roadside assistance for $120. On August 1, 2016, a customer purchases a
contract that runs from that date through July 31, 2017. Given that roadside assistance
requests occur equally throughout the contract period, AAA uses “proportion of time”
as its measure of progress toward completion. Required:
1) Prepare the journal entries that AAA would record on August 1 and on December 31,
2016, with respect to this transaction.
2) State the amounts included in relevant accounts in AAA’s 2016 income statement and
balance sheet.