FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Drake Appliance Company, an accrual basis taxpayer, sells home appliances and service contracts. Determine the effect of each of the following transactions on the company's 2023 gross income assuming that the company uses any available options to
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a. In December 2022, the company received a $1,200 advance payment from a customer for an appliance that Drake special-ordered from the manufacturer. The appliance did not arrive from the manufacturer until January 2023, and Drake immediately delivered it to the customer. The sale was reported in 2023 for financial accounting purposes.
What amount is included in the 2023 gross income?
$fill in the blank 7c5329031fb4f9c_1
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b. In October 2023, the company sold a 6-month service contract for $240. The company also sold a 36-month service contract for $1,260 in July 2023.
Assuming a calendar year-end, what amount is included in the 2023 gross income?
$fill in the blank 200e070c800a040_1
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c. On December 31, 2023, the company sold an appliance for $1,200. The company received $500 cash and a note from the customer for $700 and $240 interest, to be paid at the rate of $10 a month for 24 months. Because of the customer's poor credit record, the fair market value of the note was only $600. The cost of the appliance was $750.
What amount is included in the gross receipts and what is the gross profit?
The 2023 gross receipts from the transaction are $fill in the blank 024554fd7063fde_1 and the gross profit from the transaction is $fill in the blank 024554fd7063fde_2.
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