I'm not sure how to get the numbers for 2020 sales, 2021 sales table using 2019 sales table under Cost Recovery Method.
Today, we covered the Cost Recovery Method of accounting for installment sales. We isolated the 2019 sales from our example and followed them through the three years of payments, creating a chart including cash collected, amount applied to cost recovery, cost yet to be recovered, amount of GP recognized using the Cost Recovery Method, the amount of GP recognized for that year's sales in each year under the Installment Method, and the amount of GP recognized on the financial statements, using GAAP, for that year's sales in each of the three years. I want to remind you that there is an extra homework assignment! I'd like you to create exactly the same table for 2020 sales from our example in class, and also for 2021 sales. Create exactly the same table. For 2020 sales, since we know that all the remainder will be collected in 2022, you can and should actually extend that table to 2022. For 2021 sales, we don't have enough information to extend the table beyond 2021. When you have created the additional 2 tables, I'd like to ask you to show journal entry number 5, where we recognize GP, in each of the three years under the Cost Recovery Method. If there is no entry 5 in a given year, say so. I hope the assignment is clear. 2020 2019 226000 164980 2021 261000 195750 248000 176080 71920 0.29 61020 0.27 65250 0.25 Installment sales Cost of Installment sales Gross profit Rate of Gross Profit Cash Receipts 2019 Sales 2020 Sales 2021 Sales Total cash collected in year 85000 45000 96000 123000 87000 147000 279000 85000 219000 Cost Recovery Method 2019 Sales 2019 85000 85000 2020 96000 79980 Collections Collected Cost Recovery GP Recognized - Cost Rec Cost yet to be recovered GP recognized - installment GP recognized - GAAP 0 16020 0 25920 79980 22950 61020 2021 Total 45000 226000 0 164980 45000 61020 0 N/A 12150 61020 0 61020 0 2019 Sales 1 To record 2019 installment sales Installment A/R 2019 226000.00 Installment Sales 226000.00 2 To record 2019 CGS CGS 164980.00 Inventory 164980.00 3 to close Installment Sales and CGS Installment Sales 226000.00 CGS 164980.00 Installment Sales 226000.00 CGS Deferred GP 2019 164980.00 61020.00 4 to record the collection of cash Cash 85000.00 Installment A/R 2019 85000.00 5 To record realized GP Deferred GP 2019 22950.00 85000 cash collected for 2019 sales X.27 GP % for 2019 sales = 22950 Realized GP 22950.00 Today, we covered the Cost Recovery Method of accounting for installment sales. We isolated the 2019 sales from our example and followed them through the three years of payments, creating a chart including cash collected, amount applied to cost recovery, cost yet to be recovered, amount of GP recognized using the Cost Recovery Method, the amount of GP recognized for that year's sales in each year under the Installment Method, and the amount of GP recognized on the financial statements, using GAAP, for that year's sales in each of the three years. I want to remind you that there is an extra homework assignment! I'd like you to create exactly the same table for 2020 sales from our example in class, and also for 2021 sales. Create exactly the same table. For 2020 sales, since we know that all the remainder will be collected in 2022, you can and should actually extend that table to 2022. For 2021 sales, we don't have enough information to extend the table beyond 2021. When you have created the additional 2 tables, I'd like to ask you to show journal entry number 5, where we recognize GP, in each of the three years under the Cost Recovery Method. If there is no entry 5 in a given year, say so. I hope the assignment is clear. 2020 2019 226000 164980 2021 261000 195750 248000 176080 71920 0.29 61020 0.27 65250 0.25 Installment sales Cost of Installment sales Gross profit Rate of Gross Profit Cash Receipts 2019 Sales 2020 Sales 2021 Sales Total cash collected in year 85000 45000 96000 123000 87000 147000 279000 85000 219000 Cost Recovery Method 2019 Sales 2019 85000 85000 2020 96000 79980 Collections Collected Cost Recovery GP Recognized - Cost Rec Cost yet to be recovered GP recognized - installment GP recognized - GAAP 0 16020 0 25920 79980 22950 61020 2021 Total 45000 226000 0 164980 45000 61020 0 N/A 12150 61020 0 61020 0 2019 Sales 1 To record 2019 installment sales Installment A/R 2019 226000.00 Installment Sales 226000.00 2 To record 2019 CGS CGS 164980.00 Inventory 164980.00 3 to close Installment Sales and CGS Installment Sales 226000.00 CGS 164980.00 Installment Sales 226000.00 CGS Deferred GP 2019 164980.00 61020.00 4 to record the collection of cash Cash 85000.00 Installment A/R 2019 85000.00 5 To record realized GP Deferred GP 2019 22950.00 85000 cash collected for 2019 sales X.27 GP % for 2019 sales = 22950 Realized GP 22950.00
