(Installment Sales Computations and Entries) Paul Dobson Stores sell appliances for cash and also on the installment plan. Entries to record cost of sales are made monthly.
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PAUL DOBSON STORES |
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|
Dr. |
Cr. |
|
|
Cash |
$153,000 |
|
|
Installment Accounts Receivable, 2012 |
56,000 |
|
|
Installment Accounts Receivable, 2013 |
91,000 |
|
|
Inventory—New Merchandise |
123,200 |
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|
Inventory—Repossessed Merchandise |
24,000 |
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|
Accounts Payable |
$ 98,500 |
|
|
Deferred Gross Profit, 2012 |
45,600 |
|
|
Capital Stock |
170,000 |
|
|
Retained Earnings |
93,900 |
|
|
Sales |
343,000 |
|
|
Installment Sales |
200,000 |
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|
Cost of Goods Sold |
255,000 |
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|
Cost of Installment Sales |
120,000 |
|
|
Loss on Repossession |
800 |
|
|
Operating Expenses |
128,000 |
|
|
$951,000 |
$951,000 |
|
The accounting department has prepared the following analysis of cash receipts for the year.
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Cash sales (including repossessed merchandise) |
$424,000 |
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Installment accounts receivable, 2012 |
96,000 |
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Installment accounts receivable, 2013 |
109,000 |
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Other |
36,000 |
|
Total |
$665,000 |
Repossessions recorded during the year are summarized as follows.
|
2012 |
|
|
Uncollected balance |
$8,000 |
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Loss on repossession |
800 |
|
Repossessed merchandise |
4,800 |
Instructions
From the trial balance and accompanying information:
(a) Compute the rate of gross profit on installment sales for 2012 and 2013.
(b) Prepare closing entries as of December 31, 2013, under the installment sales method of accounting.
(c) Prepare an income statement for the year ended December 31, 2013. Include only the realized gross profit in the income statement.