Red Sox Company has the following sales of land and cash collections: In 2010, t

Question

Red Sox Company has the following sales of land and cash collections:
In 2010, there was the sale of Bux Land for $3,000,000 that cost them $1,500,000. The purchase agreement required that payments be made of $1,200,000 when there are tenants on the land and the following payment of $1,200,000 be made in 2011.

In 2011, there was the sale of Spokane County land for $2,700,000 which cost Red Sox $1,800,000. The payments were required were $900,000 when development started on the land and then the final payments of $600,000 in 2012 and 2013. Red Sox had cash collections of the $900,000 and a payment of $700,000 for Bux Land.

Explanation / Answer

example The sale of the land should be recorded as follows: Dr. Accounts receivable 10,000 Cr. Land 7,500 Cr. Gain on sale of land 2,500 When you receive the payment you should record the following entry: Dr. Cash or bank Cr. Accounts receivable

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