Question - Installment-Sales Method and Cost-Recovery Method
Swift Corp., a capital goods manufacturing business that started on January 4, 2010, and operates on a calendar-year basis, uses the installment-sales method of profit recognition in accounting for all its sales. The following data were taken from the 2010 and 2011 records.
|
|
2010
|
2011
|
|
Installment sales
|
$480,000
|
$620,000
|
|
Gross profit as a percent of costs
|
25%
|
28%
|
|
Cash collections on sales of 2010
|
$130,000
|
$240,000
|
|
Cash collections on sales of 2011
|
-0-
|
$160,000
|
The amounts given for cash collections exclude amounts collected for interest charges.