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 $300,000 $400,000

Cost of sales 180,000 280,000

Customer collections on: 2016 sales 120,000 100,000 2017 sales 150,000

Required:

Calculate the amount of gross profit that would be recognized each year from installment sales.

Prepare all necessary journal entries for each year.

Repeat requirements 1 and 2 assuming that Ajax uses the cost recovery method to account for its installment sales.