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# Journal Entries for Installment Sale: Effective Interest Method

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On December 31, 2008 Company A rendered services to Company B at an agreed price of \$91,844.10 (do not round), accepting \$36,000 down and agreeing to accept the balance in four equal installments of \$18,000 receivable each December 31. An assumed interest rate of 11% is imputed.

Prepare the entries that would be recorded by Company A for the sale and for the receipts and interest on the following dates(the effective interest method is used for amortization purposes).

(a) December 31, 2008
(b) December 31, 2009
(c) December 31, 2010
(d) December 31, 2011
(e) December 31, 2012

#### Solution Preview

Please find the accounting solutions in the attached file.

PROBLEM 8-9

(a) December 31, 2008
Particulars L.F Debit Credit
Cash a/c 36000
Company B a/c 55844.10
Sales a/c 91844.10

91844.10 91844.10
Note for (a):
Total sales amount = \$91844.10
Amount Paid in advance = \$36000
Remaining amount = 91844.10 - 36000 = \$55844.10
(b) December 31, 2009
Cash a/c 18000
...

#### Solution Summary

Journal entries for installment sales effective interest methods are determined.

\$2.19