Question

KC Music Corporation sells pipe organs on a deferred-payment plan. Summary information appears below: \begin{tabular}{|c|c|c|c|} \hline & 2014 & 2015 & 2016 \\ \hline \begin{tabular}{l} Sales \\ Cost of goods sold \\ Gross profit \end{tabular} & \begin{tabular}{l} $ \$ 160,000 $ \\ $ (112,000) $ \\ $ \$ 48,000 $ \\ \end{tabular} & \begin{tabular}{l} $ \$ 220,000 $ \\ $ (165,000) $ \\ $ \$ 55,000 $ \\ \end{tabular} & \begin{tabular}{l} $ \$ 300,000 $ \\ $ (219,000) $ \\ $ \$ 81,000 $ \\ \end{tabular} \\ \hline \begin{tabular}{l} Customer collections on: \\ 2014 sales \\ 2015 sales \\ 2016 sales \end{tabular} & $ \$ 60,000 $ & \begin{tabular}{r} $ \$ 80,000 $ \\ 100,000 \end{tabular} & \begin{tabular}{r} $ \$ 20,000 $ \\ 80,000 \\ 140,000 \end{tabular} \\ \hline \end{tabular} Required: 1. Calculate the amount of gross profit that would be recognized each year under the installment sales method. 2. Calculate the amount of gross profit that would be recognized each year under the cost recovery method.

          KC Music Corporation sells pipe organs on a deferred-payment plan. Summary information appears below:
\begin{tabular}{|c|c|c|c|}
\hline & 2014 & 2015 & 2016 \\
\hline \begin{tabular}{l} 
Sales \\
Cost of goods sold \\
Gross profit
\end{tabular} & \begin{tabular}{l}
\( \$ 160,000 \) \\
\( (112,000) \) \\
\( \$ 48,000 \) \\
\end{tabular} & \begin{tabular}{l}
\( \$ 220,000 \) \\
\( (165,000) \) \\
\( \$ 55,000 \) \\
\end{tabular} & \begin{tabular}{l}
\( \$ 300,000 \) \\
\( (219,000) \) \\
\( \$ 81,000 \) \\
\end{tabular} \\
\hline \begin{tabular}{l} 
Customer collections on: \\
2014 sales \\
2015 sales \\
2016 sales
\end{tabular} & \( \$ 60,000 \) & \begin{tabular}{r}
\( \$ 80,000 \) \\
100,000
\end{tabular} & \begin{tabular}{r}
\( \$ 20,000 \) \\
80,000 \\
140,000
\end{tabular} \\
\hline
\end{tabular}

Required:
1. Calculate the amount of gross profit that would be recognized each year under the installment sales method.
2. Calculate the amount of gross profit that would be recognized each year under the cost recovery method.

KC Music Corporation sells pipe organs on a deferred-payment plan. Summary information appears below:

2014 2015 2016

Sales

Cost of goods sold

Gross profit

$ 160,000

(112,000)

$ 48,000

$ 220,000

(165,000)

$ 55,000

$ 300,000

(219,000)

$ 81,000

Customer collections on:

2014 sales

2015 sales

2016 sales
$ 60,000
$ 80,000

100,000

$ 20,000

80,000

140,000

Required:
1. Calculate the amount of gross profit that would be recognized each year under the installment sales method.
2. Calculate the amount of gross profit that would be recognized each year under the cost recovery method.

Added by F-Tima S.

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