Response to the following problem:
Charter Corporation, which began business in 2013, appropriately uses the installment sales method of accounting for its installment sales. The following data were obtained for sales made during 2013 and 2014:
|
|
2013
|
2014
|
|
Installment sales
|
$ 560,000
|
$550,000
|
|
Cost of installment sales
|
392,000
|
467,500
|
|
Cash collections on installment sales during:
|
|
|
|
2013
|
170,000
|
125,000
|
|
2014
|
170,000
|
160,000
|
Required:
1. How much gross profit should Charter recognize in 2013 and 2014 from installment sales?
2. What should be the balance in the deferred gross profit account at the end of 2013 and 2014?