1. Under the "installment sales method," the realized gross profit is equal to the gross profit rate multiplied by collection on sale. 2. Under the "installment sales method," the deferred gross profit at any given point of time may be determined by multiplying the balance of receivable by the gross profit rate. Fact pattern: Monkey Co. uses the "installment sale
TRUE OR FALSE
1. Under the "installment sales method," the realized gross profit is equal to the gross profit rate multiplied by collection on sale.
2. Under the "installment sales method," the deferred gross profit at any given point of time may be determined by multiplying the balance of receivable by the gross profit rate.
Fact pattern:
Monkey Co. uses the "installment sales method." Monkey buys a banana for P2 and sells it for P10.
3. If Monkey collects Pl from the sale, Monkey's realized gross profit is PO.50.
4. If the ending balance of Monkey's installment receivable is P5, the deferred gross profit is P4.
5. If the ending balance of Monkey's installment receivable is P3, the total collections during the period must be P7.
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