INSTALLMENT SALE. Jeffrey's Billiards sold a pool table to C. Cobbs on October 31, 19x2. The terms of the sale are no money down and payments of $50 per month for 30 months, with the first payment due on November 30, 19x2. The table sold to Cobbs cost Jeffrey’s $800. Jeffrey’s uses an interest rate of 12% compounded monthly

(1% per month).

REQUIRED:

‘ 1. Prepare the cash flow diagram for this sale.

2. What amount of revenue should Jeffrey's record on October 31, 19x2?

3. Prepare the entry to record the sale on October 31. Assume that Jeffrey's records cost of goods sold at the time of the sale (perpetual inventory accounting).

4, How much interest revenue will Jeffrey's record from October 31, 19x2, through December 31, 19x2?

5. By how much was 19x2 income before taxes increased by this sale?

P10-51. ACCOUNTS PAYABLE. Richmond Company engaged in the following transactions during 19x3:

a) Purchased $16,000 of merchandise on February 16. The seller offered terms of 1/10, n/15,

b) Paid for the purchased merchandise (transaction

a) on February 26.

c) Borrowed $140,000 on a 10-month, 9% interest-bearing note on April 30.

d) Purchased $28,000 of merchandise on June 4. The seller offered terms of 2/15, n/20.

e) Paid for the purchased merchandise (transaction

d) on June 24.

f) Received from Haywood, Inc., on August 19 a $12,000 deposit against a total selling price of $120,000 for merchandise to be manufactured for Haywood.

g) Paid quarterly installments of FICA and individual federal income tax withholdings, as shown below, on October 15. The employer’s share of FICA was recorded as an expense during the quarter.

BICA taxg i cc Ree aoe ae tyres $116,000 Federal income tax withheld ...... 419,000 Assume that Richmond records purchases using the gross method.

REQUIRED:

1. Prepare journal entries for these transactions.

2. Prepare any adjusting entries necessary at December 31, 19x3.