On December 15, 2021, Lima Lighting Co. sold a tract of land that cost $3,600,000 for $4,500,000. Lima appropriately uses the installment sales method of accounting for this transaction. Terms called for a down payment of $500,000 with the balance in two equal annual installments payable on December 15, 2022, and December 15, 2023. Ignore interest charges. Lima has a December 31 year-end. In 2021, Lima would recognize realized gross profit of.

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

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

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answer///supply is elastic, and demand is inelastic;