On june 1, 2013 the Lutmann and Dowd company sold inventory to the ushman corporation for $400,000. Terms of the sale called for a down payment of $100,000 and four annual installment also will include interest on the unpaid balance applying an appropriate interest rate. The inventory cost of foster $150,000. The company uses the perpetual inventory system.
Required:
1. Compute the ammount of gross profit to be recognized from the installment sale in 2013, 2014,2015,2016 and 2017 using point of delivery revenue recognition. Ignore instead charges.
2. Repeat Requirement 1 applying the insallment sales method.
3. Repeat Requirement 2 applying the cost recovery method.