(Installment Sales Computations and Schedules) Saprano Company, on January 2, 2012, entered into a contract with a manufacturing company to purchase room size air conditioners and to sell the units on an installment plan with collections over approximately 30 months with no carrying charge. For income tax purposes Saprano Company elected to report income from its sales of air conditioners according to the installment sales method. Purchases and sales of new units were as follows.
|
Units Purchased |
Units Sold |
|||
|
Year |
Quantity |
Price Each |
Quantity |
Price Each |
|
2012 |
1,400 |
$130 |
1,100 |
$200 |
|
2013 |
1,200 |
112 |
1,500 |
170 |
|
2014 |
900 |
136 |
800 |
205 |
Collections on installment sales were as follows.
|
Collections Received |
|||
|
2012 |
2013 |
2014 |
|
|
2012 sales |
$42,000 |
$88,000 |
$ 80,000 |
|
2013 sales |
51,000 |
110,000 |
|
|
2014 sales |
34,600 |
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In 2014, 50 units from the 2013 sales were repossessed and sold for $120 each on the installment plan. At the time of repossession, $2,000 had been collected from the original purchasers, and the units had a fair value of $3,000. General and administrative expenses for 2014 were $60,000. No charge has been made against current income for the applicable insurance expense from a 3 year policy expiring June 30, 2015, costing $7,200, and for an advance payment of $12,000 on a new contract to purchase air conditioners beginning January 2, 2015.
Instructions
Assuming that the weighted average method is used for determining the inventory cost, including repossessed merchandise, prepare schedules computing for 2012, 2013, and 2014:
(a) (1) The cost of goods sold on installments.
(2) The average unit cost of goods sold on installments for each year.
(b) The gross profit percentages for 2012, 2013, and 2014.
(c) The gain or loss on repossessions in 2014.
(d) The net income from installment sales for 2014. (Ignore income taxes.)