Nevada Real Estate Sales Company sells lots in its development in Dry Creek Canyon under terms calling for small cash down payments with monthly installment payments spread over a few vears. Following are data on the company's operations for its first three years: fgt85

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Gross margin rate Cash collected in 1999 from sales of lots made in 1997 1998 1999 45% 48% 50% $640,000 $800,000 $900,000 The total selling price of the lots sold in 1999 was $3,000,000, while general and admin- istrative expenses (which are not included in the costs used to determine gross margin) were $800.000. a. Compute net income for 1999 assuming revenue is recognized on the sale of a lot. b. Compute net income for 1999 assuming use of the installment basis of accounting for sales and gross margin.