Reference no: EM132771552

Question -

a. A company sold a computer on an installment basis on October 1, 2019. The unit cost to the buyer was 86,400, but the installment selling price was set at 122,400. The terms of payment included the acceptance of a used computer with a trade-in allowance of 43,200. Cash of 7,200 was paid in addition to the traded-in computer with the balance to be paid in ten monthly installments due at the end of each month commencing the month of sale.

It would require 1,800 to recondition the used computer so that it could be resold for 36,000. A 15% gross profit was usual from the sale of used computer. The realized gross profit from the 2019 collections amounted to?

b. These data pertain to installment sales of a company:

*Down payment, 20%

*Installment sales: 545,000 in year 1; 785,000 in year 2; and 968,000 in year 3.

*Gross profit based on cost, 35% (Hint: convert to gross profit based on sales)

*Collections after down payment: 40% in the year of sale, 35% in the year after sale, and 25% in the third year.

What is the installment accounts receivable at the end of year 3? How much is the unrealized gross profit at the end of year 3?