Problemon july 1 2013 the foster company sold inventory to, Ask an Expert

Accounting

Problem:

On July 1, 2013, the Foster Company sold inventory to the Slate Corporation for $420,000. Terms of the sale called for a down payment of $105,000 and three annual installments of $105,000 due on each July 1, beginning July 1, 2014. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The inventory cost Foster $168,000. The company uses the perpetual inventory system.

Required:

Question 1: Compute the amount of gross profit to be recognized from the installment sale in 2013, 2014, 2015, and 2016 using point of delivery revenue recognition.

Question 2: Compute the amount of gross profit to be recognized from the installment sale in 2013, 2014, 2015, and 2016, applying the installment sales method.

Question 3: Compute the amount of gross profit to be recognized from the installment sale in 2013, 2014, 2015, and 2016, applying the cost recovery method.

Note: Please show how to work it out.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91165878

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