(Installment-Sales Method and Cost-Recovery Method)
On April 1, 2014, Joy Ltd. sold land for $600,000. The note will be collected as follows: $100,000 in 2014, $200,000 in 2015, and $300,000 in 2016. The property had cost Joy $122,000 when it was purchased in 2001.
Instructions
(a) Compute the amount of gross profit realized each year, assuming Joy uses the cost-recovery method.
(b) Compute the amount of gross profit realized each year, assuming Joy uses the installment-sales method.