Compute amount of gross profit to be recognized

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Reference no: EM13140995

On June 1, 2009, the Luttman and Dowd Company sold inventory to the Ushman Corporation for $400,000. Terms of the sale called for a down payment of $100,000 and four annual installments of $75,000 due on each June 1, beginning June 1, 2010. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The inventory cost Foster $150,000. The company uses the perpetual inventory system.

Required:

1. Compute the amount of gross profit to be recognized from the installment sale in 2009, 2010, 2011, 2012, and 2013 using point of delivery revenue recognition. Ignore interest charges.

2. Repeat requirement 1 applying the installment sales method.

3. Repeat requirement 1 applying the cost recovery method.

Reference no: EM13140995

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