(Analysis of Installment-Sales Accounts) Charles Austin Co. appropriately uses the installment-sales method of accounting. On December 31, 2009, the books show balances as follows.

Instructions

(a) Prepare the adjusting entry or entries required on December 31, 2009 to recognize 2009 realized gross profit. (Installment receivables have already been credited for cash receipts during 2009.)

(b) Compute the amount of cash collected in 2009 on accounts receivable each year.

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Installment Receivables Deferred Gross Profit Gross Profit on Sales 2007 $11,000 2007 $ 7,000 2007 35% 2008 40,000 2008 26,000 2008 34% 2009 80,000 2009 95,000 2009 32%