Answer:
In 2021, Lima would recognize realized gross profit of $100,000
Explanation:
Data provided by the question
Cost of land = $3,600,000
Amount Sold for = $4,500,000
down payment = $500,000
Gross profit in percentage = (selling price - cost price) ÷ cost price
= ($4,500,000 - $3,600,000) ÷ $4,500,000
= $900,000 ÷ $4,500,000
= 20%
To determine the realized gross profit Lima would recognized in 2021
= Gross profit in percentage × down payment
= 20% x $500,000
= $100,000
Answer:
The realized gross profit for December 31 2021 is $100,000
Explanation:
The total gross profit on the sale=proceeds less cost of land
proceeds of land sale is $4,500,000
cost of land is $3,600,000
total gross profit =$4,500,000-$3,600,000
=$900,000
Gross profits a % of proceeds=$900,000/$4500,000*100%
=20%
The gross profit percentage implies that each year gross profit realized in that is 20% of payment received in that year
in 2021 $500,000 payment was received,hence the profit on the $500,000=$500,000*20%
=$100,000
The remaining profit of $800,000($900,000-$100,000) would be spread over the next two years equally since equal payments are expected in both years
