Tanner Furniture Company concluded its first year of operations in which it made

Question

Tanner Furniture Company concluded its first year of operations in which it made sales of $800,000, all on installment. Collections during the year from down payments and installments totaled $300,000. Purchases for the year totaled $400,000; the cost of merchandise on hand at the end of the year was $80,000.

Instructions
Using the installment-sales method, make summary entries to record:
(a) the installment sales and cash collections;
(b) the cost of installment sales;
(c) the unrealized gross profit;
(d) the realized gross profit.

Explanation / Answer

A Cost of Installment Sales 600,000 Inventory 600,000 Cash 300,000 Installment Accounts Receivable 300,000 B Installment Accounts Receivable 1,000,000 Installment Sales 1,000,000 C Installment Sales 1,000,000 Cost of Installment Sales 600,000 Deferred Gross Profit (40%) 400,000 D Deferred Gross Profit (40% × $300,000) 120,000 Realized Gross Profit on Installment Sales 120,000

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