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How sale of the television to John affect the firm profits

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Question - Consider the following situation:

On March 1, 2021, the Blockbuster Video Store in Tacoma, Washington, placed an order for ten 52-inch Sony LCD televisions. The vendor they ordered from gave the firm sixty days to pay the $1,200 cost per television.

On April 12, 2021, John Lee came into the Blockbuster Video Store and purchased one of the Sony televisions for $1,950. Part of John's motivation for making the purchase was that he did not have to make a payment for the purchase for six months and did not have to make a down payment either.

If Blockbuster ends its first quarter on May 1, how does the sale of the television to John affect the firm's gross profits for the quarter? What is the impact of the sale on the firm's cash flow?

If John were to make a 10% cash down payment at the time of the purchase and then not begin making payments for six months, what is the impact of the sale on the firm's gross profit and cash flow?

Reference no: EM133054066

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