On November 15, 2016, LaGrow Developers Sold a Parcel of Land

question 10

Multiple Choice

On November 15, 2016, LaGrow Developers sold a parcel of land for $4,000,000. They had originally paid $3,000,000 for the land. The terms of the sale called for a $1,000,000 down payment, and the balance in two equal installments payable on November 15, 2017 and November 15, 2018. Disregard interest charges. LaGrow has a December 31 year-end. Refer to LaGrow Developers. Assuming that LaGrow uses the cost-recovery method, in its December 31, 2017 balance sheet, the company would report ________.

• A) $500,000 net installment accounts receivable
• B) $3,000,000 net installment accounts receivable
• C) $1,500,000 net installment accounts receivable
• D) $2,000,000 net installment accounts receivable

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Definitions:

Comprehensive Income

The change in equity of a company during a period from transactions and other events, excluding any changes resulting from investments by and distributions to equity claimholders.

GAAP

Generally Accepted Accounting Principles, a collection of standardized guidelines and practices for financial accounting in the United States to ensure consistency and transparency.

Comparative Financial Statements

These are financial statements that present data for multiple periods side by side to facilitate comparison and analysis of financial performance over time.

Retroactively Adjusted

Adjustments made to financial statements or other data for previous periods in light of new information or to correct errors.