Question:
Refer to the situation described in BE 5–1. How much gross profit will Apache recognize in both 2013
and 2014 applying the installment sales method?
Answer:
2013 Cost recovery % = Cost Sales:
$1,200,000
= 40% (implying a gross profit % = 60%)
$3,000,000
2013 gross profit = 2013 cash collection of $150,000 x 60% = $90,000
2014 gross profit = 2014 cash collection of $150,000 x 60% = $90,000
Refer to the situation described in BE 5–1. How much gross profit will Apache recognize in both 2013
and 2014 applying the installment sales method?
Answer:
2013 Cost recovery % = Cost Sales:
$1,200,000
= 40% (implying a gross profit % = 60%)
$3,000,000
2013 gross profit = 2013 cash collection of $150,000 x 60% = $90,000
2014 gross profit = 2014 cash collection of $150,000 x 60% = $90,000
