At December 31, 2014, Grinkov Corporation had the following account balances. In
ID: 2420908 • Letter: A
Question
At December 31, 2014, Grinkov Corporation had the following account balances.
Installment Accounts Receivable, 2013
$72,100
Installment Accounts Receivable, 2014
113,000
Deferred Gross Profit, 2013
23,100
Deferred Gross Profit, 2014
41,800
Most of Grinkov sales are made on a 2-year installment basis.
Indicate how these accounts would be reported in Grinkov’s December 31, 2014, balance sheet.
The 2013 accounts are collectible in 2015, and the 2014 accounts are collectible in 2016.
Grinkov Corporation
Balance Sheet as at December 31, 2014
Installment Accounts Receivable, 2013
$72,100
Installment Accounts Receivable, 2014
113,000
Deferred Gross Profit, 2013
23,100
Deferred Gross Profit, 2014
41,800
Explanation / Answer
The deferred amount of gross profit is stated on the balance sheet as an offset to the accounts receivable account. As such, the deferred profit appears as a contra account immediately below the accounts receivable line item in the assets section of the balance sheet.According to this approach the following entry is made in balance Sheet
Balance Sheet as on 31 Dec 2013 Amount Assets Current assets Accounts Receivable $72,100 Less: deferred Gross Profit 23100 Net Accounts Receivable $49,000 Balance Sheet as on 31 Dec 2014 Assets Amount Current assets Accounts Receivable $113,000 Less: Deferred Gross Profit $41,800 Net Accounts Receivable $71,200Related Questions
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