(Installment-Sales Computation and Entries—Periodic Inventory) Catherine Fox Inc. sells merchandise for cash and also on the installment plan. Entries to record the end of each year.

Repossessions of merchandise (sold in 2008) were made in 2009 and were recorded correctly as follows.

Part of this repossessed merchandise was sold for cash during 2009, and the sale was recorded by a debit to Cash and a credit to Sales.
The inventory of repossessed merchandise on hand December 31, 2009, is $4,000; of new merchandise, $127,400. There was no repossessed merchandise on hand January 1, 2009.
Collections on accounts receivable during 2009 were:

Installment Accounts Receivable, 2008 $80,000 Installment Accounts Receivable, 2009 50,000 The cost of the merchandise sold under the installment plan during 2009 was $117,000.
The rate of gross profit on 2008 and on 2009 installment sales can be computed from the information given.

Instructions

(a) From the trial balance and other information given above, prepare adjusting and closing entries as of December 31, 2009.

(b) Prepare an income statement for the year ended December 31, 2009. Include only the realized gross profit in the income statement.

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Deferred Gross Profit, 2008 7,200 Repossessed Merchandise 8,000 Loss on Repossessions 2,800 Installment Accounts Receivable, 2008 18,000