Workout Items

Exercise 1

The Ethelco Appliance Company recorded installment sales of Br600,000 in 2002. A record was kept of the different articles sold on the installment basis. At the end of the year the total cost of goods sold on the installment basis was calculated at Br405,000. The total collections on installment sales for the year were Br360,000. The estimated value of the merchandise repossessed was Br24,000, and balances owed on the repossessions were Br40,000. Perpetual inventory accounts were maintained.

Instructions

Prepare the journal entries required for the data above, including the entries:

1. To set up the total realizable gross profit at the end of the year,
2. To record the cash collections
3. To record the repossessions, and
4. To record the realized gross profit

Exercise 2

The following partial information is available for the Cupp Company:

Installment method sales

$120,000

(C)

Installment method cost of goods sold

(A)

$63,000

Gross profit percentage

(B)

30%

Cash receipts on installment method sales

2007 sales

25,000

(D)

2008 sales

(E)

Realized gross profit on installment method sales

2007 sales

5,000

7,000

2008 sales

9,000

Required

Compute the unknown amounts. (Note: It is not necessary to compute the amounts in the numerical sequence.)

Exercise 3

The following information is available for the Butler Company in 2007, its first year of operations:

Total credit sales (including installment method sales) $205,000

Total cost of goods sold (including installment method cost of goods sold) 130,000

Installment method sales 65,000

Installment method cost of goods sold 39,000

Cash receipts on credit sales (including installment method sales of $20,000) 120,000

Required

1.Prepare the journal entries for 2007.

2.If the company collected $45,000 in 2008 on its 2007 installment method sales, prepare the appropriate journal entries in 2008.