In July, Telly-Rental sells a home theatre for $1,000 on an installment basis. The cost of goods sold is $400. How much deferred gross profit is recorded by Telly-Rental in July?

Question

Quizplus · Accepted Answer

Deferred gross profit is the profit that is yet to be earned on installment sales. It is calculated by subtracting the cost of goods sold from the total selling price and dividing the result by the number of installments. In this case, there is only one installment, so the entire gross profit is deferred. Therefore, deferred gross profit is $1,000 - $400 = $600. Hence, the correct answer is (C) $600.

In July, Telly-Rental Sells a Home Theatre for $1,000 on an Installment