Question - Krawczyk Industrial sells equipment on an installment plan. On September 1, 2011, Krawczyk entered into an installment sale contract with Broadbent Boat Builders for a six-year period. Equal annual payments under the installment sale are $187,500 and are due on August 31 of each year beginning in 2012.
Additional information:
(a) The equipment sold to Broadbent cost Krawczyk $637,500.
(b) The implicit interest rate is 10%.
Compute the income or loss before taxes recorded by Krawczyk for the years ended December 31, 2011, and 2012, as a result of the above transaction, assuming that the installments are collected as due under the contract.