ch18 practice

# What is the rate of gross profit on the installment

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96. What is the rate of gross profit on the installment sales made by Vaughn Corporation during 2010? a. 75% b. 60% c. 40% d. 25% 97. If expenses, other than the cost of the merchandise sold, related to the 2010 installment sales amounted to \$90,000, by what amount would Vaughn’s net income for 2010 increase as a result of installment sales? 98. What amount would be shown in the December 31, 2011 financial statement for realized gross profit on 2010 installment sales, and deferred gross profit on 2010 installment sales, respectively? Use the following information for questions 99 – 101. During 2010, Martin Corporation sold merchandise costing \$2,100,000 on an installment basis for \$3,000,000. The cash receipts related to these sales were collected as follows: 2010, \$1,200,000; 2011, \$1,050,000; 2012, \$750,000. 99. What is the rate of gross profit on the installment sales made by Martin Corporation during 2010? 100. If expenses, other than the cost of the merchandise sold, related to the 2010 installment sales amounted to \$120,000, by what amount would Martin’s net income for 2010 increase as a result of installment sales? a. \$1,080,000 b. \$360,000 c. \$270,000 d. \$240,000 101. What amount would be shown in the December 31, 2011 financial statements for realized gross profit on 2010 installment sales, and deferred gross profit on 2010 installment sales, respectively? 18 - 23

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Use the following information for questions 102 and 103. Coaster manufactures and sells logging equipment. Due to the nature of its business, Coaster is unable to reliably predict bad debts. During 2010, Coaster sold equipment costing \$2,400,000 for \$3,600,000. The terms of the sale were 20% down, with equal payments due quarterly over the next 3 years. All payments for 2010 were made on schedule. Round answers to two places. 102. Assuming that Coaster uses the installment method of accounting for its installment sales, what amount of realized gross profit will Coaster report in its income statement for the year ended December 31, 2010? 103. Assuming that Coaster uses the cost-recovery method of accounting for its installment sales, what amount of realized gross profit will Coaster report in its income statement for the year ended December 31, 2011? 104. On January 1, 2010, Shaw Co. sold land that cost \$210,000 for \$280,000, receiving a note bearing interest at 10%. The note will be paid in three annual installments of \$112,595 starting on December 31, 2010. Because collection of the note is very uncertain, Shaw will use the cost-recovery method. How much revenue from this sale should Shaw recognize in 2010? a. \$0 b. \$21,000 c. \$28,000 d. \$70,000 *105. On April 1, 2010 Weston, Inc. entered into a franchise agreement with a local business- man. The franchisee paid \$240,000 and gave a \$160,000, 8%, 3-year note payable with
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