Question:
Refer to the situation described in BE 5–1. What should be the balance in the deferred gross profit
account at the end of 2014 applying the installment sales method?
Answer:
Initial deferred gross profit ($3,000,000 – 1,200,000) $1,800,000
Less gross profit recognized in 2013 ($150,000 x 60%) (90,000)
Less gross profit recognized in 2014 ($150,000 x 60%) (90,000)
Deferred gross profit at the end of 2014 $1,620,000
Refer to the situation described in BE 5–1. What should be the balance in the deferred gross profit
account at the end of 2014 applying the installment sales method?
Answer:
Initial deferred gross profit ($3,000,000 – 1,200,000) $1,800,000
Less gross profit recognized in 2013 ($150,000 x 60%) (90,000)
Less gross profit recognized in 2014 ($150,000 x 60%) (90,000)
Deferred gross profit at the end of 2014 $1,620,000
