Question:
Since there is no reasonable basis for estimating the degree of collectibility, Astor Co. uses the
installment sales method of revenue recognition for the following sales:
What amount should Astor report as deferred gross profit in its December 31, 2014, balance sheet for the
2013 and 2014 sales?
a. $225,000
b. $150,000
c. $160,000
d. $250,000
Answer:
2. d. The deferred gross profit in the balance sheet at December 31, 2014, should be the balances in
the accounts receivable accounts on that date for 2013 and 2014 sales multiplied by the
appropriate gross profit percentage:
Accounts receivable: sales in 2013 2014
Total sales $ 600,000 $ 900,000
Less: Collections to date (300,000) (300,000)
Less: Write-offs to date (200,000) (50,000)
Since there is no reasonable basis for estimating the degree of collectibility, Astor Co. uses the
installment sales method of revenue recognition for the following sales:
What amount should Astor report as deferred gross profit in its December 31, 2014, balance sheet for the
2013 and 2014 sales?
a. $225,000
b. $150,000
c. $160,000
d. $250,000
Answer:
2. d. The deferred gross profit in the balance sheet at December 31, 2014, should be the balances in
the accounts receivable accounts on that date for 2013 and 2014 sales multiplied by the
appropriate gross profit percentage:
Accounts receivable: sales in 2013 2014
Total sales $ 600,000 $ 900,000
Less: Collections to date (300,000) (300,000)
Less: Write-offs to date (200,000) (50,000)
