Installment Sales Accounting
London Corporation has been using the cash method to account for income since its first year of operation in 2008. All sales are made on credit with notes receivable given by the customers. The income statements for 2008 and 2009 included the following amounts:
|
|
2008 |
2009 |
|
Revenues—collection on principal |
$32,000 |
$50,000 |
|
Revenues—interest |
3,600 |
5,500 |
|
Cost of goods purchased* |
45,200 |
52,020 |
The balances due on the notes at the end of each year were as follows:
|
|
2008 |
2009 |
|
Notes receivable (gross)—2008 |
$62,000 |
$36,000 |
|
Notes receivable (gross)—2009 |
0 |
60,000 |
|
Unearned interest revenue—2008 |
7,167 |
5,579 |
|
Unearned interest revenue—2009 |
0 |
8,043 |
Instructions: Give the journal entries for 2008 and 2009 assuming the installment sales method was used rather than the cash method.