Ajax Company appropriately accounts for certain sales using the installment sales method. The perpetual inventory system is used. Information related to installment sales for 2018 and 2019 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.

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2018 2019 $300,000 $400,000 Sales Cost of sales Customer collections on: 180,000 280,000 120,000 2018 sales 2019 sales 100,000 150,000