Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses the installment sales method for revenue recognition. In 2020, Lake began operations and sold jet skis with a total price of $1,170,000 that cost Lake $585,000. Lake collected $390,000 in 2020, $390,000 in 2021, and $390,000 in 2022 associated with those sales. In 2021, Lake sold jet skis with a total price of $1,890,000 that cost Lake $1,134,000. Lake collected $630,000 in 2021, $495,000 in 2022, and $495,000 in 2023 associated with those sales. In 2023, Lake also repossessed $270,000 of jet skis that were sold in 2021. Those jet skis had a fair value of $101,250 at the time they were repossessed. In its December 31, 2021, balance sheet, Lake would report: Multiple Choice Deferred gross profit of $600,000. Deferred gross profit of $1,305,000. Installment receivables (net) of $1,170,000.

Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses the installment sales method for revenue recognition. In 2020, Lake began operations and sold jet skis with a total price of $1,170,000 that cost Lake $585,000. Lake collected $390,000 in 2020, $390,000 in 2021, and $390,000 in 2022 associated with those sales. In 2021, Lake sold jet skis with a total price of $1,890,000 that cost Lake $1,134,000. Lake collected $630,000 in 2021, $495,000 in 2022, and $495,000 in 2023 associated with those sales. In 2023, Lake also repossessed $270,000 of jet skis that were sold in 2021. Those jet skis had a fair value of $101,250 at the time they were repossessed. In its December 31, 2021, balance sheet, Lake would report: Multiple Choice Deferred gross profit of $600,000. Deferred gross profit of $1,305,000. Installment receivables (net) of $1,170,000.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

Section: Chapter Questions

Problem 6MC

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Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses the installment sales method for revenue recognition. In 2020, Lake began operations and sold jet skis with a total price of $1,050,000 that cost Lake $525,000. Lake collected $350,000 in 2020, $350,000 in 2021, and $350,000 in 2022 associated with those sales. In 2021, Lake sold jet skis with a total price of $1,770,000 that cost Lake $1,062,000. Lake collected $590,000 in 2021, $525,000 in 2022, and $525,000 in 2023 associated with those sales. In 2023, Lake also repossessed $130,000 of jet skis that were sold in 2021. Those jet skis had a fair value of $48,750 at the time they were repossessed.Total cash collections on installment sales during 2021 would be:…
Lake Power Sports sells jet skis and other powered recreational equipment. Customers pay one-third of the sales price of a jet ski when they initially purchase the ski, and then pay another one-third each year for the next two years. Because Lake has little information about the ability to collect these receivables, it uses the cost recovery method to recognize revenue on these installment sales. In 2020, Lake began operations and sold jet skis with a total price of $630,000 that cost Lake $315,000. Lake collected $210,000 in 2020, $210,000 in 2021, and $210,000 in 2022 associated with those sales. In 2021, Lake sold jet skis with a total price of $1,380,000 that cost Lake $828,000. Lake collected $460,000 in 2021, $260,000 in 2022, and $260,000 in 2023 associated with those sales. In 2023, Lake also repossessed $400,000 of jet skis that were sold in 2021. Those jet skis had a fair value of $150,000 at the time they were repossessed. In 2020, Lake would recognize realized gross profit…
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