On August 1, Year 1, Anderson Company sells inventory costing $331,200 for $517,500. The sales agreement states that the buyer will pay $67,500 down and 20 equal monthly installment payments, with the first payment beginning on September 1, Year 1.
Required:
Compute the amount of gross profit to be recognized for each of the three years.
Note: Assume that since collection is not assured (significant uncertainty), the company has decided to use the installment sales method of recognizing revenue.