On November 15, 2016, LaGrow Developers sold a parcel of land for $4,000,000. They had originally paid $3,000,000 for the land. The terms of the sale called for a $2,000,000 down payment, and the balance in two equal installments payable on November 15, 2017 and November 15, 2018. Disregard interest charges. LaGrow has a December 31 year-end. Refer to LaGrow Developers. Assuming that LaGrow uses the installment sales method, in its December 31, 2016 balance sheet, the company would report ________. (Do not round intermediary calculations, and round your final answer to the nearest whole dollar.)
A) $1,500,000 net installment account receivable
B) $1,000,000 net installment account receivable
C) $4,000,000 net installment account receivable
D) $2,000,000 net installment account receivable

Question

Quizplus · Accepted Answer

Under the installment sales method, the net installment account receivable is the total sales price minus the down payment received. Here, $4,000,000 - $2,000,000 = $2,000,000. However, since the balance is to be paid in two equal installments, the net installment account receivable for 2016 would be $1,500,000 ($2,000,000 / 2 installments).

On November 15, 2016, LaGrow Developers Sold a Parcel of Land