Kim Company Uses the Installment Method of Revenue Recognition Required:
A

question 62

Essay

Kim Company uses the installment method of revenue recognition.The following data pertain to Kim's installment sales for the years ended December 31,2013 and 2014:
$$\begin{array} { | l | r | r | } \hline & \underline { \mathbf { 2 0 1 3 } } & \underline { \mathbf { 2 0 1 4 } } \\\hline \text { Installment receivables at year-end on } 2013 \text { sales } & \$ 120,000 & \$ 60,000 \\\hline \text { Installment reecivables at year-end on } 2014 \text { sales } & & 138,000 \\\hline \text { Installment sales } & 160,000 & 180,000 \\\hline \text { Cost of goods sold } & 80,000 & 108,000 \\\hline\end{array}$$
Required:
a.What amount should Kim report as deferred gross profit in its December 31,2013 and 2014 balance sheets?
b.What amounts should Kim report as realized gross profit in its 2013 and 2014 income statements?

---

Definitions:

Chebyshev's Theorem

A statistical rule that gives a minimum proportion of observations that fall within a specified number of standard deviations from the mean, for any distribution.

Empirical Rule

A statistical rule stating that for a normal distribution, nearly all data will fall within three standard deviations of the mean.

Five-number Summary

A descriptive statistic that provides a quick overview of a data set's distribution, consisting of the minimum, first quartile, median, third quartile, and maximum.

Starting Salaries

The initial compensation that an employee receives when starting a new job.