Question

The painting company sells equiptment. All sales are 3 year contract. This uses the INSTALLMENT METHOD of accointing for realized gross profit. It expects to collect 28% of its sales during the year of sale, 60% during the following year and 10% during the last year of the contract.

determine :

Gross profit %

Cash collected for each year

Realized gross profit for each year

Sales Cost of good.sold gross profit %

2017. 900,000 513,000

2018. 1,200,000 672,000

2019. 1,600,000 928,000

Answer 1

		2017	2018	2019
	Gross Profit %	43%	44%	42%
	Cash collected	$       2,52,000	$       8,76,000	$       12,58,000
	Realized gross profit	$       1,08,360	$       3,80,040	$          5,43,660
	Workings:
		2017	2018	2019
	Sales	$       9,00,000	$     12,00,000	$       16,00,000
Less:	Cost of goods sold	$       5,13,000	$       6,72,000	$          9,28,000
	Gross profit	$       3,87,000	$       5,28,000	$          6,72,000
(Gross profit/Sales)	Gross Profit %	43%	44%	42%
		2017	2018	2019
	Cash collected for:
	2017	$       2,52,000	$       5,40,000	$             90,000
	2018		$       3,36,000	$          7,20,000
	2019			$          4,48,000
	Total	$       2,52,000	$       8,76,000	$       12,58,000
		2017	2018	2019
	Gross profit realized for:
	2017	$       1,08,360	$       2,32,200	$             38,700
	2018		$       1,47,840	$          3,16,800
	2019			$          1,88,160
	Total	$       1,08,360	$       3,80,040	$          5,43,660