Question :
On 1st July, 2013, the Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the sale called for a down payment of $75,000 and three yearly installments of $75,000 due on each July 1, starting July 1, 2014. Each installment also will add interest on the unpaid balance applying an appropriate interest rate. The inventory cost Foster $120,000. The company uses the perpetual inventory system.
Required:
1.
Evaluate the amount of gross income to be recognized from the installment sale in 2013, 2014, 2015, and 2016 using point of delivery revenue recognition.
2.
Evaluate the amount of gross profit to be recognized from the installment sale in 2013, 2014, 2015, and 2016, operating the installment sales method.
3.
Evaluate the amount of gross profit to be recognized from the installment sale in 2013, 2014, 2015, and 2016, applying the cost recovery technique. Ignore interest charges.