On July 1, 2013, the Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the sale called for a down payment of $75,000 and three annual installments of $75,000 due on each July 1, beginning July 1, 2014. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The inventory cost Foster $120,000. The company uses the perpetual inventory system.
Required:
- Compute the amount of gross profit to be recognized from the installment sale in 2013, 2014, 2015 and 2016 using point of delivery revenue recognition. Ignore interest charges.
- Repeat requirement 1 applying the installment sales method.
- Repeat requirement 1 applying the cost recovery method.
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