On January 1, 2008, Stein Co. sold a used machine to Mays, Inc. for $350,000. On this date, the machine had a depreciated cost of $245,000. Mays paid $50,000 cash on January 1, 2008 and signed a $300,000 note bearing interest at 10%. The note was payable in three annual installments of $100,000 beginning January 1, 2009. Stein appropriately accounted for the sale under the installment method. Mays made a timely payment of the first installment on January 1, 2009 of $130,000, which included interest of $30,000 to date of payment. At December 31, 2009, Stein has deferred gross profit of

Question

Quizplus · Accepted Answer

$300,000 + $50,000 = $350,000
$350,000 - $245,000 = $105,000 gross profit (30% gross profit rate)
($300,000 - $100,000) × 30% = $60,000.