Tussle Company began operations on January 1,2014,and appropriately uses the installment method of accounting.The following data are available for 2014 and 2015: The realized gross profit for 2015 is
A) $440,000.
B) $240,000.
C) $390,000.
D) $600,000.

Question

Tussle Company began operations on January 1,2014,and appropriately uses the installment method of accounting.The following data are available for 2014 and 2015:  The realized gross profit for 2015 is
A) $440,000. 
B) $240,000. 
C) $390,000. 
D) $600,000.

Quizplus · Accepted Answer

To calculate the realized gross profit for 2015, we need to first calculate the total realized gross profit for both 2014 and 2015.

Total contract price for both years = $3,600,000 ($2,000,000 for 2014 and $1,600,000 for 2015) 
Total cost of goods sold for both years = $2,640,000 ($1,460,000 for 2014 and $1,180,000 for 2015)

Realized gross profit for both years = Total contract price - Total cost of goods sold = $960,000 ($540,000 for 2014 and $420,000 for 2015)

To calculate the realized gross profit for 2015, we need to subtract the realized gross profit for 2014 from the total realized gross profit for both years:

Realized gross profit for 2015 = Total realized gross profit - Realized gross profit for 2014 = $420,000 - $30,000 = $390,000

Therefore, the answer is C) $390,000.

Tussle Company Began Operations on January 1,2014,and Appropriately Uses the Installment