Wolf Computer Company began operations in 2018. The company allows customers to pay in installments formany of its products. Installment sales for 2018 were $1,000,000. If revenue is recognized at the point of delivery,$600,000 in gross profit would be recognized in 2018. If the company instead uses the cost recovery method,$100,000 in gross profit would be recognized in 2018.Required:1. What was the amount of cash collected on installment sales in 2018?2. What amount of gross profit would be recognized if the company uses the installment sales method?
Wolf Computer Company began operations in 2018. The company allows customers to pay in installments formany of its products. Installment sales for 2018 were $1,000,000. If revenue is recognized at the point of delivery,$600,000 in gross profit would be recognized in 2018. If the company instead uses the cost recovery method,$100,000 in gross profit would be recognized in 2018.Required:1. What was the amount of cash collected on installment sales in 2018?2. What amount of gross profit would be recognized if the company uses the installment sales method?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Wolf Computer Company began operations in 2018. The company allows customers to pay in installments for
many of its products. Installment sales for 2018 were $1,000,000. If revenue is recognized at the point of delivery,
$600,000 in gross profit would be recognized in 2018. If the company instead uses the cost recovery method,
$100,000 in gross profit would be recognized in 2018.
Required:
1. What was the amount of cash collected on installment sales in 2018?
2. What amount of gross profit would be recognized if the company uses the installment sales method?
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