How much is the realized gross profit recognized in the year of sale?
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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.
5. Garden Co. uses the installment sales method. Garden Co. sells a good costing ₱10,000 for an installment
sale price of ₱16,000. Garden Co. accepts old merchandise as down payment and gives the customer a
trade-in value of ₱4,000 for this merchandise. The fair value of the old merchandise is ₱6,000. Subsequent
cash collections during the period amount to ₱6,000. How much is the realized gross profit recognized in the
year of sale?
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