Question

c. On December 31, 2019, the company sold an appliance for $1,200. The company received $500 cash and a note from the customer for $700 and $260 interest, to be paid at the rate of $40 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

Answer 1

gross receipts and gross profit are $1200 and $450 respectively

Step-by-step explanation:

given data

sold appliance = $1,200

cash received = $500

interest = $700

interest = $260

rate = $40 a month

time = 24 month

fair market value = $600

cost of appliance = $750

to find out

gross receipts and gross profit

solution

we know here that for 2019 gross receipts from the transaction is

gross receipts = $1200

and

the gross profit from the transaction is

gross profit = $1,200 - $750

gross profit = $450

so gross receipts and gross profit are $1200 and $450 respectively