Installment sales method and cost recovery Kenny Corp

| June 3, 2016

Question
Installment sales method and cost recovery Kenny Corp; a capital goods manufacturing business that started on January 4/2007 and operates on a calendar year basis uses the installment- sales method of profit recognition in accounting for all its sales,. The following data were taken from the 2007 and 2008 records.

2007 2008
Installment Sales $ 480,000 $ 620,000
Gross profit as a percent of cost 25% 28%
Cash collections on sales 2007 $140,000 $240,000
Cash collections on sales 2008 -0- $180,000

Compute the amount of realized gross profit to be recognized on the income statement; prepared using the cost- recovery method.

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