Reference no: EM132791263

Rooster Co. uses the installment sales method. Relevant information follows:

                                                           20x1                       20x2

Sales                                      300,000                480,000

Cost of sales                             240,000                  336,000

Installment receivable - 20x1       180,000                   60,000

Installment receivable - 20x2                                       360,000

Rooster Co. repossessed a property that was sold in 20x1 for ?50,000. Total collections from this sale were ?24,000. Rooster Co. expects to resell the property for ?30,000 after reconditioning costs of ?4,000. The normal profit margin on resale of repossessed property is 30%.

problem 1: How much is the profit recognized in 20x2

a. 54,800

b. 56,000

c. 51,000

d. 51,600

problem 2: How much is the total realized gross profit in 20x2?

a. 53,200

b. 51,600

c. 54,800

d. 56,000

problem 3: How much is the gain or loss on repossession?

a. 4,300

b. 3,200

c. 2,900

d. 3,800