Presented below is summarized information for LB, Inc. regarding two sales made
ID: 2426228 • Letter: P
Question
Presented below is summarized information for LB, Inc. regarding two sales made on the installment basis. Both sales were financed monthly for 2 years. Both sales were made on March 1, 2015.
Data: ABC Co. 123 Inc.
Installment sales………………………………………………… 250,000 68,000
Cost of installment sales…………………………………………200,600 56,300
Interest rate on installment sales is 9%
123, Inc. defaulted after an April 1, 2016 payment.
Information regarding repossession of inventory for the default:
Estimated value of merchandise repossessed is $36,186
Instructions:
a.) Determine payments for both ABC Co. and 123 Inc.
b.) Prepare complete amortization schedules for both sales
c.) Prepare journal entries required by the above information for the year ended December 31, 2015 using the installment sale method of accounting. Record the collections for each company in one summary entry
d.) Record the 2016 default
e.) Prepare partial balance sheet and income statement for the year ended December 31, 2015
Explanation / Answer
a. Payments for ABC Co. = 250000 / Cumulative PVF @ 0.75% for 24 periods
= 250000 / 21.889
= $11421 per month.
Payment for 123 Inc. = 68300 / Cumulative PVF @ 0.75% for 24 periods
= 68000 / 21.889
= $3107 per month
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