02 :(4marks) lowa Development (ID) made the following land sales and had the fol

Question

02 :(4marks) lowa Development (ID) made the following land sales and had the following cash collections: 2012: Sold Altoona land for $2,000,000 that cost ID $1.200,000. The land agreement required payments of $1,000,000 within one week of occupancy of the land, and the other S1,000,000 in 2013 Required: a-Prepare journal entries to record the sale, cash collections, and recognition of gross profit in 2012 and 2013 applying the installment sales method or Deferred gross profit method under U.S GAAP for significant uncertainty in collectability. b-Prepare journal entries to record the sale, cash collections, and recognition of gross profit in 2012 and 2013 applying the IFRS method for significant uncertainty in collectability

Explanation / Answer

Calcualtion of Gross Profit

Sales 2000000

less Cost 1200000

Profit 800000

The related revenue is deferred as follows.

B.

sale a/c Dr 2000000

To profit 800000

To Cost 1200000

cash AS/c Dr 1000000

To Accounts Recievable 1000000

Deffered Gross profit A/c dr 800000

to Recognized Profit A/c 800000

Installment receivables $2000000 Installment sales $20000000

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