Accounting for Installment Sales Flashcards
Formula Gross profit
Sales - Cost of goods sold
Formula Gross profit percentage
Gross profit/sales price
Formula Earned gross profit
Cash collections x gross profit percentage
Formula Deferred gross profit
Installment receivable x gross profit percentage
What is the balance sheet presentation for installment sale?
AR - Deferred gross proift = Balance
JE to record installment sale
Dr. Installment AR, Cr. Inventory, Cr. Deferred gross profit
JE to recognize cash collection
Dr. Cash, Cr. Installment AR
JE to record profit on collection
Dr. Deferred gross profit, Cr. Realized gain on installment sales
In the cost recovery method, the expected profit on the sale is recorded as?
Deferred gross profit
Where is cash first applied in the cost recovery method?
Recovery of product costs
Collections after all costs have been recovered in the cost recovery method is recognized as?
Profit