Question
Swift Corp., a capital goods manufacturing business that started on January 4, 2019, and operates on a calendar-year basis, uses the cost recovery method of
Swift Corp., a capital goods manufacturing business that started on January 4, 2019, and operates on a calendar-year basis, uses the cost recovery method of profit recognition in accounting for all its sales. The following data were taken from the 2019 and 2020 records.
2019 2020
Installment sales $800,000 $1,000,000
Cost of sales $600,000 $700,000
Cash collections on sales of 2019 $500,000 $300,000
Cash collections on sales of 2020 0 $600,000
Instructions: Using cost recovery method
(a) Compute the amount of realized gross profit to be recognized in each year
(b) State where the balance of Unrealized Gross Profit in each year
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