House Publishers offered a contest in which the winner would receive $1 million, payable over 20 years. On December 31, Year 4, House announced the winner of the contest and signed a note payable to the winner for $1 million, payable in $50,000 installments every January 2. Also on December 31, Year 4, House purchased an annuity for $418,250 to provide the $950,000 prize monies remaining after the first $50,000 installment, which was paid on January 2, Year 5.
In its Year 4 income statement, what should House report as contest prize expense?

A company's financial success over a particular accounting period is reported using one of the three key financial statements, the income statement. The cash flow statement and the balance sheet are the other two important statements. The income statement focuses on the company's earnings for a specific time period, including profits and losses. An income statement, sometimes referred to as a profit and loss (P&L) statement or a summary of sales and expenses, offers crucial information about a company's operations, the effectiveness of its leadership, underperforming industries, and performance in comparison to peers in the same sector.

The income statement is a crucial component of the corporate performance reports that must be filed with the U.S. Securities and Exchange Commission (SEC).

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