how to calculate annual gross profit of a company

Question

Carperter Company has used the instalment method of accounting since it began operations at the beginning of 2013. The following information pertains to its operations for 2013:

 

Installment sales                                 $ 2,100,000

Cost of installment sales                         1,400,000

Collections of installment sales             840,000

The amount of gross profit to be reported on the December 31, 2013 income statement is

  1. $ 840,000.
  2. $ 560,000.
  3. $ 0.
  4. $ 280,000.

 

 

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