2019 2018

Sales 900,000 600,000

Collections 300,000 200,000
100,000
Write offs 50,000 50,000
150,000
Installment Accounts receivable 12/31/18 550,000 100,000
Multiply by gross profit rate 40% 30%
Deferred gross profit 12/31/18 220000 30000 250000

Installment sales 2018 800,000

Less: Collection on installment sales 300,000
installment accounts receivable 12/31/18 500,000
Multiply by gross profit rate on sales
[(800,000-480,000)/800,000] 40%
Deferred gross profit 12/31/18 200000

Deferred gross profit (before adjustment) 38,000

Less: Deferred gross profit (after adjustment)
2017 sales (16,250 x 30/130 3750
2018 sales 90000 x 33 1/3/133 1/3 22500 26,250
Realized gross profit 11,750
Less: expenses relating to installment sales 1500
Net income on installment sales 10,250

Installment sales 1,000,000

Less: collections on installment sales 200,000
Installment accounts receivable 12/31/18 800,000
Multiply by gross profit rate on sales
[(1,000,000-500,000)/1,000,000)] 50%
Deferred gross profit 12/31/18 400000

Year 2 Year 3
Installlment sales 785,000 968,000
downpayment (20%) 157,000 193600
balance 628,000 774,400
Collections:Year of sale 40 % 251200 309760
Year after sale 35% 219800
Installment accounts receivable end of year 3 157,000 464,640 621,640

Installment accounts receivable end of year 3 621,640

Multiply by gross profit rate on sales (35/135) 26%
Unrealized gross profit end of year 3 161166