Item 8 Item 8 Reliable Enterprises sells distressed merchandise on extended cred
ID: 2335144 • Letter: I
Question
Item 8 Item 8 Reliable Enterprises sells distressed merchandise on extended credit terms. Collections on these sales are not reasonably assured, and bad debt losses cannot be reasonably predicted. It is unlikely that repossessed merchandise is in condition to be re-sold. Therefore, Reliable uses the cost recovery method. Merchandise costing $32,750 was sold for $58,750 in 2017. Collections on this sale were $21,000 in 2017, $15,600 in 2018, and $22,150 in 2019. In its 2017 year-end balance sheet, Reliable would report installment receivables (net) of:
2017 year-end balance sheet, Reliable would report installment receivables (net) of:
Multiple Choice
$11,750.
$37,750.
$21,000.
$26,152.
Explanation / Answer
Sale Entry
Installments Receivable 58750
inventory 32750
Deffered gross profit 26000
Payment entry
cash 21000
installment receivable 21000
ANSWER
installment receivable 58750-21000 = $37750
Deffered gross profit =(26000)
Installments Receivable =$11750
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