Wolf Computer Company began operations in 2011. The company allows customers to pay in installments for many of its products. Installment sales for 2011 were $1,000,000. If revenue is recognized at the point of delivery, $600,000 in gross profit would be recognized in 2011. If the company instead uses the cost recovery method, $100,000 in gross profit would be recognized in 2011.

Required:

1. What was the amount of cash collected on installment sales in 2011?

2. What amount of gross profit would be recognized if the company uses the installment sales method?