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:

Intent

The state of mind with which an act is done, signifying purpose or intention.

Joint Ownership

A form of property ownership in which two or more parties share ownership rights simultaneously.

Limited Partner

In a limited partnership, a partner who contributes capital to the partnership but has no right to participate in its management and has no liability for partnership debts beyond the amount of her or his investment.

Dissolution

The process of officially ending or dissolving a business, partnership, or marriage, along with the settling of its affairs.