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Journal Entries - Installment Sales Method

Ajax Company appropriately accounts for certain sales using the installment sales method. The perpetual inventory system is used. Information related to installment sales for 2011 and 2012 is as follows:

2011 2012
Sales $ 255,000 355,000
Cost of sales 153,000 248,500
Customer collections on:
2011 sales 120,000 100,000
2012 sales 150,000

Prepare all necessary journal entries for each year. (Omit the "$" sign in your response.)

2012 To recognize gross profit from installment sales Debit Credit
Deferred gross profit
Realized gross profit

I only need this portion of the journal entries.

Solution Preview

The gross profit percentages are as follows:

2011 2012
Sales $ 255,000 ...

Solution Summary

This solution illustrates how to compute the gross profit under the installment sales method and how to journalize the cash receipt in a subsequent year.

$2.19