Grant Co. began operations on January 1, 2008 and appropriately uses the installment method of accounting. The following information pertains to Grant's operations for 2008:
The balance in the deferred gross profit account at December 31, 2008 should be
A) $330,000.
B) $495,000.
C) $390,000.
D) $720,000.

Question

Grant Co. began operations on January 1, 2008 and appropriately uses the installment method of accounting. The following information pertains to Grant's operations for 2008:
 The balance in the deferred gross profit account at December 31, 2008 should be
A) $330,000. 
B) $495,000. 
C) $390,000. 
D) $720,000.

Quizplus · Accepted Answer

$1,800,000 - $1,080,000 = $720,000 (40% gross profit rate)
$720,000 - ($825,000 × 40%) = $390,000.

Grant Co Began Operations on January 1, 2008 and Appropriately Uses