Curiosity Company provided the following financial information for its installme
ID: 2362437 • Letter: C
Question
Curiosity Company provided the following financial information for its installment-sales for the current year. Financial Data: Installment sales for current year $ 800,000 Cost of Goods Sold on installment basis $ 600,000 Payments by customers $ 320,000 Repossessed Merchandise - Unpaid balances $ 52,000 Repossessed Merchandise - Estimated Value $ 26,800 Required: a) Prepare journal entries for the end of the year based on the information above. b) Prepare the entry to record the gross profit realized in the current year.Explanation / Answer
Answer:
(a)
Installment Accounts Receivable
$ 800,000
Installment Sales Revenue
$ 800,000
Cash
$ 320,000
Installment Accounts Receivable
$ 320,000
Cost of Installment Sales
$ 600,000
Inventory
$ 600,000
Repossessed Merchandise
$ 26,800
Deferred Gross Profit *
$ 13,000
Loss on Repossession **
$ 12,200
Installment Accounts Receivable
$ 52,000
Rate of Gross Profit
$ 200,000
= 25%
$ 800,000
*25% * $52000 =
$ 13,000
**[$26800 - ($52000 - $13000)]
Installment Sales Revenue
$ 800,000
Cost of Installment Sales
$ 600,000
Deferred Gross Profit
$ 200,000
(b)
Deferred Gross Profit
$ 80,000
Realized Gross Profit
$ 80,000
Answer:
(a)
Installment Accounts Receivable
$ 800,000
Installment Sales Revenue
$ 800,000
Cash
$ 320,000
Installment Accounts Receivable
$ 320,000
Cost of Installment Sales
$ 600,000
Inventory
$ 600,000
Repossessed Merchandise
$ 26,800
Deferred Gross Profit *
$ 13,000
Loss on Repossession **
$ 12,200
Installment Accounts Receivable
$ 52,000
Rate of Gross Profit
$ 200,000
= 25%
$ 800,000
*25% * $52000 =
$ 13,000
**[$26800 - ($52000 - $13000)]
Installment Sales Revenue
$ 800,000
Cost of Installment Sales
$ 600,000
Deferred Gross Profit
$ 200,000
(b)
Deferred Gross Profit
$ 80,000
Realized Gross Profit
$ 80,000
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