Installment Sales Computations and Entries Paul Dobson Stores sell appliances for cash and also on the installment plan. Entries to record cost of sales are made monthly.
The accounting department has prepared the following analysis of cash receipts for the year.
Cash sales (including repossessed merchandise) $424,000
Installment accounts receivable, 2010 96,000
Installment accounts receivable, 2011 109,000
Other 36,000
Total $665,000
Repossessions recorded during the year are summarized as follows.
2010
Uncollected balance $8,000
Loss on repossession 800
Repossessed merchandise 4,800
From the trial balance and accompanying information:
(a) Compute the rate of gross profit on installment sales for 2010 and 2011.
(b) Prepare closing entries as of December 31, 2011, under the installment sales method of accounting.
(c) Prepare an income statement for the year ended December 31, 2011. Include only the realized gross profit in the incomestatement.
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