Folio Corp

question 41

Multiple Choice

Folio Corp. Folio Corp. sold a paper machine to Library Inc. on January 1, 2007. The sale price of the machine was $4,000,000 and the machine cost $3,200,000 for Folio to manufacture. Library will make four payments at the end of each year, beginning with 2007, of $1,261,883 each. The four payments of $1,261,883 when discounted at 10% have a present value of $4,000,000. An amortization table appears below:
If Folio Corp. is uncertain that it will collect all four payments from Library Inc. and uses the cost recovery method of accounting for revenue recognition what amount of gross profit should Folio recognize in 2007 from the sale?

• A) $0
• B) $861,883
• C) $172,377
• D) $800,000

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Definitions:

Progressive Reformers

Activists and policymakers in the late 19th and early 20th centuries who sought to address issues of social justice, economic inequality, and corruption through various reforms.

Capitalism

An economic system characterized by private or corporate ownership of goods and the means to produce them, with the goal of generating profit in a competitive market.

Political Developments

Changes or progress in the field of politics, including shifts in government, policy making, or the introduction of new political ideas and movements.

Progressives

A political and social reform movement in the late 19th and early 20th centuries that aimed to address issues stemming from industrialization, urbanization, and corruption, advocating for improvements in democracy, working conditions, and social justice.