Accounting

2014

Rate of gross profit current year 36%

Cash collected on current year’s sales $130,000

Profit to be deferred $75,600

Total realized profit in 2014: $46,800

2015

Current year sales

Rate of gross profit current year 34%

Cash collected on current year’s sales $100,000

Realized gross profit $34,000

Profit to be deferred $68,000

Prior year’s sales

Rate of gross profit – 2014 36%

Cash collected on 2014 sales $120,000

Gross profit realized in 2015 on 2014 sales $43,200

Total gross profit realized in 2015: $77,200

2016

Current year sales

Rate of gross profit current year 35%

Cash collected on current year’s sales $140,000

Realized gross profit $49,000

Profit to be deferred $80,500

Prior year sales – 2014

Rate of gross profit 36%

Cash collected $40,000

Gross profit realized in 2016 on 2014 sales $14,400

Prior year sales – 2015

Rate of gross profit 34%

Cash collected $110,000

Gross profit realized in 2016 on 2015 sales $37,400

Total gross profit realized in 2016: $100,800