Assume the Randall Corporation sold $30,000 worth of merchandise on the installment basis. The cost of the merchandise was $24,000, and collectibility of the receivable is uncertain. Collection in the current year on the account is $8,000. How much gross profit should be reported as realized?

Question

Quizplus · Accepted Answer

The gross profit percentage is ($30,000 - $24,000) / $30,000 = 20%. Since $8,000 was collected, the realized gross profit is 20% of $8,000, which is $1,600.

Assume the Randall Corporation Sold $30,000 Worth of Merchandise on the Installment