Highridge Enterprises, Inc. manufactures high capacity commercial water filtration systems.

Highridge Enterprises, Inc. manufactures high capacity commercial water filtration systems. It is not uncommon for Highridge to sell these systems on an installment basis, recognizing gross profit in the period of sale for GAAP purposes, and as receipts are collected for tax purposes. In 20X1, Highridge sold eight systems on an installment basis generating total gross profit of $3,200,000. Twenty five percent of each sale is collected in the current year (20X1), with the remaining seventy five percent being collected evenly over the three following years (20X2, 20X3, and 20X4).