Installment-Sales Computations and Entries Paul Dobson Stores sell appliances for cash and also on the installment plan. Entries to record cost of sales are made monthly.
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The accounting department has prepared the following analysis of cash receipts for the year.
Cash sales (including repossessed merchandise) $424,000
Installment accounts receivable, 2010 96,000
Installment accounts receivable, 2011 109,000
Other 36,000
Total $665,000
Repossessions recorded during the year are summarized as follows.
2010
Uncollected balance $8,000
Loss on repossession 800
Repossessed merchandise 4,800
From the trial balance and accompanying information:
(a) Compute the rate of gross profit on installment sales for 2010 and 2011.
(b) Prepare closing entries as of December 31, 2011, under the installment-sales method of accounting.
(c) Prepare an income statement for the year ended December 31, 2011. Include only the realized gross profit in the incomestatement.