My question is problem E18-16 which asks the following. On January 1, 2010, Wetz

Question

My question is problem E18-16 which asks the following. On January 1, 2010, Wetzel Company sold property for $250,000.The note will be collected as follows: $120,000 in 2010, $90,000 in2011, and $40,000 in 2012. The property had cost Wetzel $150,000when it was purchased in 2008. Instructions:    A-Compute the amount of gross profitrealized each year, assuming Wetzel uses the cost-recoverymethod.    B-Compute the amount of gross profitrealized each year, assuming Wetzel uses the installment-salesmethod. My question is problem E18-16 which asks the following. On January 1, 2010, Wetzel Company sold property for $250,000.The note will be collected as follows: $120,000 in 2010, $90,000 in2011, and $40,000 in 2012. The property had cost Wetzel $150,000when it was purchased in 2008. Instructions:    A-Compute the amount of gross profitrealized each year, assuming Wetzel uses the cost-recoverymethod.    B-Compute the amount of gross profitrealized each year, assuming Wetzel uses the installment-salesmethod.

Explanation / Answer

Cost Recovery Method Sales 250,000 Cost 150,000 Gain 100,000 percentage ofsales 0.4 Time Cash Realized Gain 2010 120,000 48,000 2011 90,000 36,000 2012 40,000 16,000

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