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Dedtermining the Amount of Installment Accounts Receivable

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Dolce Co. which began operations in January 1, 2011, appropriately uses the installment sales method of accounting to record revenues. The following information is available for the years ended December 31, 2011 and 2012.

2011 2012
Sales $1,000,000 $2,000,000
Gross profit realized on sales made in:
2011 $150,000 $90,000
2012 --- $200,000
Gross profit percentages 30% 40%

What amount of installment accounts receivable should Dolce report in its December 31, 2012 Balance Sheet?

a. $1,700,000
b. $1,225,000
c. $1,300,000
d. $1,775,000

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This solution illustrates how to compute a company's installment method accounts receivable.

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