Daily, Inc. appropriately used the installment method of accounting to recognize income in its financial statement. Some pertinent data relating to this method of accounting include: What amount to be realized gross profit should be reported on Daily's income statement for 2015?
A) $132,000
B) $152,000
C) $176,000
D) $216,000

Question

Daily, Inc. appropriately used the installment method of accounting to recognize income in its financial statement. Some pertinent data relating to this method of accounting include:  What amount to be realized gross profit should be reported on Daily's income statement for 2015?
A) $132,000 
B) $152,000 
C) $176,000 
D) $216,000

Quizplus · Accepted Answer

In the installment method of accounting, gross profit is recognized as payments are received from the customer. The formula to calculate gross profit is: Gross Profit = Total Contract Price x Expected Gross Profit Percentage. Therefore, the gross profit for 2015 can be calculated as follows: $800,000 x 19% = $152,000. Therefore, the correct choice is B.