The Jones Company Makes Sales on an Installment Basis

question 30

Multiple Choice

The Jones Company makes sales on an installment basis. In 2016, it sells items with a cost of $20 million. The total sales price is $25 million. Ignoring interest payments, customers pay in five equal installments, of $5 million each, with one payment in each of 2016, 2017, 2018, 2019, and 2020. If the company uses the installment method of accounting for this sale, the gross profit it will recognize in 2016 is

• A) Zero
• B) $1 million
• C) $5 million
• D) $25 million

---

Definitions:

McKinley Tariff

A significant piece of legislation passed in 1890 that raised protective tariff levels of nearly 50% on average, aimed at protecting domestic industries in the United States.

Sanford B Dole

A political leader and jurist in Hawaii who played a key role in the overthrow of the Hawaiian monarchy and served as President of the Republic of Hawaii.

Queen Of Hawaii

Refers to Liliʻuokalani, the last sovereign monarch of the Hawaiian Kingdom, who was overthrown by parties backed by the United States government in 1893.

Cuban Economic Crisis

A period of severe economic downturn in Cuba, often referring to the hardships faced in the 1990s after the dissolution of the Soviet Union, its main supporter.