Joined: 22 Sep 2011 Location: United States
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Posted: 07 Apr 2012 at 20:57 | IP Logged
In 2010, Clay Corp. made an installment sale to Lynn Corp for $500,000.
The gross profit on the sale was 30%. However, the collectability of the
sale is not reasonably assured. In 2010, Clay collected $200,000 on the
sale. The company hopes to collect the remaining balance over the next
two years. So whats the amount of revenue that should be recognized from the installment sale in 2010?
Joined: 22 Sep 2011 Location: United States
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Posted: 08 Apr 2012 at 00:32 | IP Logged
hi msod1273, actually the real answer is 200,000 (that is the revenue recognized from the installment sale in 2010)....and 60,000 is the amount of realized gross profit not the recognized revenue from the installment sale in 2010. I am not sure why its so ...its from sims problem in Wiley software
Joined: 23 Nov 2011 Location: United States
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Posted: 08 Apr 2012 at 08:44 | IP Logged
My understating is, revenue is realized sale, therefore, it is 200,000.
Thanks for posting this problem. Before I saw the answer, I was going
to say 60,000 too.
Joined: 23 Mar 2011 Location: United States
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Posted: 09 Apr 2012 at 20:19 | IP Logged
Gross profit is the excess of revenue over cost of sales. In this problem the $200,000 collected in 2010 represents 40% of the $500,000 sale, or $200,000. The cost of sales portion is 40% of the $350,000 or $140,000. Resulting in $60,000 of gross profit.
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Topic: sims problem on intallment sales?
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