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ACC305 WK 2 E5-3 page 275 - Installment sales.doc

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E5-3 on page 275 - Charter Corporaon
Prepare summary journal entries for 2011 and 2012 to account for the installment sales and cash
collecons. The company uses the perpetual inventory system.
Exercise 5-3
2011 To record installment sales
Installment receivables................................................... 360,000
Inventory..................................................................... 234,000
Deferred gross profit................................................... 126,000
2011 To record cash collections from installment sales
Cash................................................................................ 150,000
Installment receivables............................................... 150,000
2011 To recognize gross profit from installment sales
Deferred gross profit....................................................... 52,500
Realized gross profit................................................... 52,500
2012 To record installment sales
Installment receivables................................................... 350,000
Inventory..................................................................... 245,000
Deferred gross profit................................................... 105,000
2012 To record cash collections from installment sales
Cash................................................................................ 220,000
Installment receivables............................................... 220,000
2012 To recognize gross profit from installment sales
Deferred gross profit....................................................... 71,000
Realized gross profit................................................... 71,000

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