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Installment Sales Method

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Please help me with determining the collections amount during 2009 on the installment a/r for 2007, 2008, and 2009.

Ruxton, Inc. - Installment Sales Method

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In the question deferred gross profit for 2003 and 2004 is given which is assumed to be for 2007 and 2008

The sales for 2009 are $1,000,000 and the accounts receivables are $750,000. The difference of 1,000,000-750,000=250,000 has been collected in 2009.

For collection in 2008 we first find the ...

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The solution explains how to determine the amount of collections using the Installment Sales Method

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Installment Sales Method and Cost Recovery Method

(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 costs 25% 28%
Cash collections on sales of 2007 $140,000 $240,000
Cash collections on sales of 2008 0 $180,000


(a) Compute the amount of realized gross profit to be recognized on the 2008 income statement, prepared using the installment-sales method.

(b) State where the balance of Deferred Gross Profit would be reported on the financial statements for 2008.

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

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