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    Installment-Sales Method and Cost Recovery

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    Kenny Corp., a capital goods manufacturing business that started on January 4, 2007, and operates on a calendar-year basis, uses the installment-sales method of profit recognition in accounting for all its sales. The following data were taken from the 2007 and 2008 records.
    2007 2008
    Installment sales $480,000 $620,000
    Gross profit as a percent of costs 25% 28%

    Cash collections on sales of 2007 $140,000 $240,000
    Cash collections on sales of 2008 $180,000
    The amounts given for cash collections exclude amounts collected for interest charges.
    Instructions
    (b) State where the balance of Deferred Gross Profit would be reported on the financial statements for 2008.

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    https://brainmass.com/business/sales-revenue/installment-sales-method-and-cost-recovery-398518

    Solution Preview

    Your response is in Excel and has formulas in each cell to show you home the computations were made. ...

    Solution Summary

    Your response is in Excel and has formulas in each cell to show you home the computations were made. The initial journal entries and the cash collection journal entries are shown so you can see the full life of these sales and how they culminate in the required ending balance in deferred gross profit. This is now a template for other problems -- just put in new amounts and presto -- you have a full story.

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