Table 17-1
In 2016, a developer sells land for $ \$ 800,000 $. The cost of the land was $ \$ 500,000 $. He receives a $ \$ 200000 $ down payment plus three instalments of $ \$ 300,000 $, $ \$ 200000 $ and $ \$ 100,000 $ which will be paid in 2017, 2018 and 2019 . He uses the instalment method to record revenue. It is decided that $ 10 \% $ is the appropriate rate of interest.
-Refer to Table 17-1.What amount of profit will be recorded when the 2017 payment is received?
A)$300 000
B)$51 315
C)$71 315
D)$0

Question

Table 17-1
 In 2016, a developer sells land for $ \$ 800,000 $. The cost of the land was $ \$ 500,000 $. He receives a $ \$ 200000 $ down payment plus three instalments of $ \$ 300,000 $, $ \$ 200000 $ and $ \$ 100,000 $ which will be paid in 2017, 2018 and 2019 . He uses the instalment method to record revenue. It is decided that $ 10 \% $ is the appropriate rate of interest.
-Refer to Table 17-1.What amount of profit will be recorded when the 2017 payment is received?
A)$300 000
B)$51 315
C)$71 315
D)$0

Quizplus · Accepted Answer

The profit recorded when the 2017 payment is received is the difference between the amount of the payment and the cost of the land multiplied by the percentage of the payment that represents profit. The cost of the land is $ \$ 500,000 $ and the amount of the payment is $ \$ 300,000 $. The percentage of the payment that represents profit is $ 100 \% - 10 \% = 90 \% $. Therefore, the profit recorded when the 2017 payment is received is $ \$ 300,000 \times 90 \% = \$ 270,000 $.

Table 17-1 in 2016, a Developer Sells Land For $800,000 \$ 800,000 $800,000

Table 17-1
in 2016, a Developer Sells Land For $\$ 800,000$