Reference no: EM132800721

Question - 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%.

Required -

1. How much is the profit recognized in 20x2?

a. 54,800

b. 56,000

c. 51,000

d. 51,600

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

a. 53,200

b. 51,600

c. 54,800

d. 56,000

3. How much is the gain or loss on repossession?

a. 4,300

b. 3,200

c. 2,900

d. 3,800