9A video 1: installment sales

Question 0

Installment sales: equation for deferred gross profit after collection

Answer 0

Deferred gross profit after collection =

Ending A/R x GP%

Question 1

Installment sales 2 important equations

Answer 1

1) Deferred gross profit = ending receivables x GP%

2) Realize GP = cash collections x GP%

Question 2

Installment sales: realized gross profit = cash collection x GP % and it also equals?

Answer 2

Realized GP =

Deferred GP before recognition - deferred GP after recognition

Question 3

What is the journal entry to record $10,000 in installment sales in which $6,000 of inventory is shipped?

Answer 3

A/R. 10,000
Installment Sales. 10,000

Cost of Sales. 6,000
Inventory. 6,000

Question 4

Assuming the following entries are recorded:
A/R. 10,000
Installment Sales. 10,000

Cost of Sales. 6,000
Inventory. 6,000

What are the entries to close out the accounts assuming the gross profit percentage is 40% and cash collected is $1,000?

Answer 4

Installment sales. 10,000
Cost of sales. 6,000
Realized GP (40%x1,000). 400
Deferred GP. 3,600

Question 5

What is the journal entry in the installment sales process to collect $1,000 in cash?

Answer 5

Cash. 1,000

A/R. 1,000

Question 6

Cash basis is in violation of…

Answer 6

GAAP

Question 7

Installment sales:

Revenue is recognized at…

Answer 7

Point of Cash is collection

Question 8

Installment sales method can only be used when…

Answer 8

Collection of sales price (receivables) is not reasonably assured