On July 25 of this year,Raj sold land with a cost of $15,000 for $40,000.Raj collected $20,000 this year and is scheduled to receive $5,000 each year for four years starting next year plus an acceptable rate of interest.Raj's gain recognized this year is
A)$7,500.
B)$12,500.
C)$20,000.
D)$25,000.

Question

Quizplus · Accepted Answer

Raj's gain recognized this year is calculated using the installment sale method. The total gain is $25,000 ($40,000 - $15,000). The gross profit percentage is 62.5% ($25,000 gain / $40,000 sale price). This year, Raj collected $20,000, so the recognized gain is $12,500 ($20,000 x 62.5%).

On July 25 of This Year,Raj Sold Land with a Cost