Q12 On December 15, 2013, Rigsby Sales Co. sold a tract of land that cost $3,600

Question

Q12 On December 15, 2013, Rigsby Sales Co. sold a tract of land that cost $3,600,000 for $4,500,000. Terms called for a down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2014, and December 15, 2015. Due to the significant uncertainty in collectibility, Rigsby appropriately uses the IFRS method for significant uncertainty to account for this transaction. Ignore interest charges. Rigsby has a December 31 year-end. If there had been no significant uncertainty in collectibility, what would Rigsby report in its December 31, 2013 financial statements? A. Installment receivable of $4,500,000 and a gross profit of $900,000. B. Installment receivable of $4,000,000 and a gross profit of $900,000. C. Installment receivable of $2,000,000 and a gross profit of $0. D. Installment receivable of $0 and a gross profit of $o.

Explanation / Answer

Selling price of Land 4500000 Cost of Land 3600000 Gross profit 900000 Selling price of Land 4500000 less Down payment 500000 Installment receivable 4000000 So correct answe is B.

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