(Gross Profit Calculations and Repossessed Merchandise) Barnes Corporation, which began business on January 1, 2007, appropriately uses the installment-sales method of accounting. The following data were obtained for the years 2007 and 2008.

Instructions

(a) Compute the balance in the deferred gross profit accounts on December 31, 2007, and on December 31, 2008.

(b) A 2007 sale resulted in default in 2009. At the date of default, the balance on the installment receivable was $12,000, and the repossessed merchandise had a fair value of $8,000. Prepare the entry to record the repossession.

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2007 2008 Installment sales $750,000 $840,000 Cost of installment sales General & administrative expenses Cash collections on sales of 2007 Cash collections on sales of 2008 525,000 604,800 70,000 84,000 310,000 300,000 ---0- 400,000