On January 1, 2007, Barkly Company sold property for $200,000. The note will be collected as follows: $100,000 in 2007, $60,000 in 2008, and $40,000 in 2009. The propery had cost Barkly $150,000, when it was purchased in 2005.
a. Compute the amount of gross profit realized each year, assuming Barkly uses the cost-recovery method.
b. Compute the amount of gross profit realized each year, assuming Barkly uses the installment-sales method.