(Solved) (Latest ver. Aug 2020) - Kenny Harrison Corporation: Compute the amount of realized gross profit to be recognized on the 2005 income statement, prepared using the installment-sales method.
I am having problems completing the rest of the assignments similar to this problem. I just need to get in the ballpark. I will figure the rest out. I want to use this problem as a template for my test next week. I believe I will have several questions on the test for this problem. I am not comfortable with the concept.
15. (Installment-Sales Method and Cost Recovery) Kenny Harrison Corp., a capital goods manufacturing business that started on January 4, 2004, and operates on a calendar-year basis, uses the installment-sales method of profit recognition in accounting for all its sales. The following data were taken from the 2004 and 2005 records.
Installment sales $480,000 $620,000
Gross profit as a percent of cost s 25% 28%
Cash collections on sales of 2004 $140,000 $240,000
Cash collections on sales of 2005 -0- $180,000
The amounts given for cash collections exclude amounts collected for interest charges.
b. State where the balance of Deferred Gross Profit would be reported on the financial statements for 2005.
c. Compute the amount of realized gross profit to be recognized on the income
statement, prepared using the cost-recovery method.
This question was answered on: Sep 16, 2020
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