Ajax Company appropriately accounts for certain sales using the installment sales method. The perpetual inventory system is used. Information related to installment sales for 2011 and 2012 is as follows:

Required:

1. Calculate the amount of gross profit that would be recognized each year from installment sales.

2. Prepare all necessary journal entries for each year.

3. Repeat requirements 1 and 2 assuming that Ajax uses the cost recovery method to account for its installment sales.