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26 August, 14:44

On December 15, 2021, Rigsby Sales Co. sold a tract of land that cost $3,300,000 four $5,000,000. Rigsby appropriately uses the installment sales method of accounting for this transaction. Terms called for a down payment of $490,000 with the balance in two equal annual installments payable on December 15, 2022, and December 15, 2023. Ignore interest charges. Rigsby has a December 31 year-end. In 2022, Rigsby would recognize realized gross profit of:

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  1. 26 August, 16:57
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    Solution and Explanation:

    Installment Receivables (Net) of $2,905,600

    Basis Particulars Debit Credit

    Sale: - Instalment Receivables $5,000,000

    Inventory $3,200,000

    Deferred gross profit $1,800,000

    Payment: - Cash $4,90,000

    Instalment Receivables $4,90,000

    Deferred Gross profit $165,600

    Realised Gross profit $165,600

    Instalment Receivables ($5,000,000 minus $490,000) = $4,510,000

    Deferred gross profit ($1,800,000 minus $165,600) = $1,634,400

    Instalment Receivables (Net) = $2,875,600
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