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Boatwright Implements, Inc., manufactures and sells farm machinery. For most of its sales, revenue and cost of sales are recognized at the delivery date. In
Boatwright Implements, Inc., manufactures and sells farm machinery. For most of its sales, revenue and cost of sales are recognized at the delivery date. In 2018 Boatwright sold a cotton baler to a new customer for $100,000. The cost of the baler was $60,000. Payment will be made in five annual installments of $20,000 each, with the first payment due in 2018. Boatwright usually does not allow its customers to pay in installments. Due to the unusual nature of the payment terms and the uncertainty of collection of the installment payments, Boatwright is considering alternative methods of recognizing profit on this sale.
Required:
Ignoring interest charges, prepare a table showing the gross profit to be recognized from 2018 through 2022 on the cotton baler sale using the following three methods:
Required:
Ignoring interest charges, prepare a table showing the gross profit to be recognized from 2018 through 2022 on the cotton baler sale using the following three methods:
1. Revenue recognition upon delivery
2. The installment sales method
3. The cost recovery method
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1 Revenue recognition upon delivery 2018 100000 60000 40000 2019 0 2020 0 2021 0 2022 0 ...Get Instant Access to Expert-Tailored Solutions
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