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:
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.
The gross profit percentages are as follows:
Sales $ 255,000 ...
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.