Ajax Company appropriately accounts for certain sales using the installment sales method. The perpetual inventory system is used. Information related to installment sales for 2016 and 2017 is as follows:

	2016			2017
Sales	$	210,000		$	310,000
Cost of sales		126,000			186,000
Customer collections on:
2016 sales		75,000			55,000
2017 sales					105,000

Required:

1.	Calculate the amount of gross profit that would be recognized each year from installment sales.
2.	Prepare all necessary journal entries for the year 2016 and 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1.

Record the installment sales of $210,000.

2.

Record the cash collections of $75,000 on 2016 sales.

3.

Record the gross profit for 2016 using the installment sales method.

4.

Record the installment sales of $310,000.

5.

Record the cash collections of $55,000 on 2016 sales and $105,000 on 2017 sales.

6.

Record the gross profit for 2017 using the installment sales method.

Assume that Ajax uses the cost recovery method to account for its installment sales.
3-a.	Compute the following:

CASH COLLECTED = COST RECOVERY + GROSS PROFIT

2016 SALES

2016 SALES

2017 SALES

2017 TOTAL

3-b.	Prepare all necessary journal entries for the year 2016 and 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

1.

Record the installment sales of $210,000.

2.

Record the cash collections of $75,000 on 2016 sales.

3.

Record the gross profit for 2016 using the cost recovery method.

4.

Record the installment sales of $310,000.

5.

Record the cash collections of $55,000 on 2016 sales and $105,000 on 2017 sales.

6.

Record the gross profit for 2017 using the cost recovery method.