1. Trekker Company reports gross profit on the installment basis. The following data are available 2018 2019 2020 Installment sales Cost of goods – installment sales Gross profit 240,000 180,000 60,000 250,000 181,250 68,750 300,000 216,000 84,000 Collections 2018 installment contracts 2019 installment contracts 75,000 47,500 72,500 80,000 62,500 45,000 2020 installment contracts Defaults Unpaid balance of 2018 installment contracts Value assigned to repossessed merchandise Unpaid balance of 2019 installment contracts Value assigned to repossessed merchandise REQUIRED: COMPUTE THE REALIZED GROSS PROFIT BEFORE LOSS ON REPOSSESSION FOR 2020 AND THE LOSS ON REPOSSESSION FOR 2020, 15,000 6,000 16,000 9,000 12,500 6,500
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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