Carperter Company Has Used the Installment Method of Accounting Since

question 18

Multiple Choice

Carperter Company has used the installment method of accounting since it began operations at the beginning of 2015. The following information pertains to its operations for 2015: $$\begin{array} { l r } \text { Installment sales } & \$ 2,800,000 \\\text { Cost of installment sales } & 1,960,000 \\\text { Collections of installment sales } & 1,120,000 \\\text { General and administrative expenses } & 280,000\end{array}$$ The amount to be reported on the December 31, 2015 balance sheet as Deferred Gross Profit should be

• A) $ 336,000.
• B) $ 504,000.
• C) $ 672,000.
• D) $1,680,000.

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Definitions:

Average Cost

An inventory costing method where the cost of goods sold and ending inventory is determined by taking the weighted average of all units purchased.

Periodic Inventory

A method of inventory accounting where updates to inventory levels are made periodically, often at the end of the fiscal year.

Ending Inventory

The total value of goods available for sale at the end of an accounting period, calculated by adding purchases to beginning inventory and subtracting cost of goods sold.

LIFO

An inventory valuation method standing for Last In, First Out, where the most recently produced or acquired items are the first to be sold.