Luge Co., which began operations on January 2, 2006, appropriately uses the installment sales method of accounting. The following information is available for 2006:
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|
Installment accounts receivable, December 31, 2006 |
$800,000 |
|
|
Deferred gross profit, December 31, 2006 (before recognition of realized gross profit for 2006) |
560,000 |
|
|
Gross profit on sales |
40 |
% |
For the year ended December 31, 2006, cash collections and realized gross profit on sales should be
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|
Cash collections |
Realized gross profit |
|
|
a. |
$400,000 |
$320,000 |
|
b. |
$400,000 |
$240,000 |
|
c. |
$600,000 |
$320,000 |
|
d. |
$600,000 |
$240,000 |