Banana Co. began operations on January 2, 20x1. Banana uses the "installment sales method" of accounting. Banana's records on December 31, 20x1 show the following information: Installment accounts receivable, Dec. 31, 20x1 800,000 Deferred gross profit, before year-end adjustment Gross profit on sales 560,000 40% How much is the realized gross profit in 20x1?
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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.
![Banana Co. began operations on January 2, 20x1. Banana uses the "installment sales method" of
accounting. Banana's records on December 31, 20x1 show the following information:
Installment accounts receivable, Dec. 31, 20x1
Deferred gross profit, before year- end adjustment
Gross profit on sales
800,000
560,000
40%
How much is the realized gross profit in 20x1?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F45fe4c57-b0e6-4485-95b7-0010badb1350%2Fddf586e1-fcfc-4590-bad3-0df93e156d80%2F0mgc9qj_processed.jpeg&w=3840&q=75)
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