Installment Sales
Knight’s Furniture sells furniture and electronic items. The majority of its business is on credit, and the following information is available relating to sales transactions for 2007, 2008, and 2009.
|
|
2007 |
2008 |
2009 |
|
Installment sales (net of interest) |
$102,000 |
$111,000 |
$124,000 |
|
Gross profit percentage |
37% |
40% |
39% |
|
Cash collections on installment sales: |
|
|
|
|
Principal—2007 |
$51,600 |
$30,150 |
$16,000 |
|
Principal—2008 |
|
68,520 |
30,200 |
|
Principal—2009 |
|
|
75,130 |
|
Interest—2007 |
6,720 |
13,250 |
2,810 |
|
Interest—2008 |
|
5,460 |
17,163 |
|
Interest—2009 |
|
|
5,977 |
Instructions: Prepare the journal entries for the years 2007–2009 assuming Knight’s uses the installment sales method for revenue recognition and records receivables net of interest.