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Afar 2 - Installment Sales
Afar 2 - Installment Sales
R Company sells residential subdivision lots on installment basis. Gross profit rates were
relatively constant throughout the years. The following information was taken from the
accounting records of R as at December 31, 2022.
On January 1, 2020, X sells 20 acres of farmland for 7,500,000 taking in exchange a 10%
interesting-bearing note. X purchased the farmland in 2008 at a cost of 5,000,000. The note will
be paid in three installments of 2,812,750 each December 31, 2020, 2021 and 2022.
F accounts for its sales under the installment sales method. On December 31, 2021, its ledger
accounts, include the following balances:
Installment sales in 2021 were made at 40% gross profit rate. It has been the policy of the
company to increase its gross profit rate by 5% every year.
1. What is the total realized gross profit in 2021?
2. What is the collection in 2021?
3. What is the total deferred gross profit as of December 31, 2021?