On June 11, of last year, Derrick sold land with a cost of $15,000 for $45,000. Derrick collected $20,000 last year and is scheduled to receive $5,000 each year for five years starting this year plus an acceptable rate of interest. Derrick receives the $5,000 installment required this year. Derrick's recognized gain this year is

Question

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Derrick's recognized gain is calculated by determining the gross profit percentage from the sale and applying it to the installment received. The gross profit is $30,000 ($45,000 - $15,000), and the gross profit percentage is 66.67% ($30,000/$45,000). Applying this percentage to the $5,000 installment received this year results in a recognized gain of $3,333.

On June 11, of Last Year, Derrick Sold Land with a Cost