Ajax Company appropriately accounts for certain sales using the installment sale

Question

Ajax Company appropriately accounts for certain sales using the installment sales method. The perpetual inventory system is used. Information related to instaliment sales for 2016 and 2017 is as follows: Sales Cost of sales 2016 2017 $380,000 $480,000 266,000312,000 on: 2016 sales 2017 sales 160,000 140,000 190,000 Required 1. Calculate the amount of gross profit that would be recognized each year from installment sales Gross proe 2. Prepare all necessary joumal entries for the year 2016 and 2017. (If no entry is required for a transactionlevent, select "No journal entry required" in the first account field.) wew traneaction lisvlow geaheral lurnal 2016 Accounts receivable Inventory Deferred gross profit Deferred gross proft 2016 Cash 2016 Cost of goods sold Deferred gross proft Sales revenue 2017 Accounts receivable Inventory Deferred gross profit 2017 Cash 2017 Cost of goods solod Deferred gross profit Sales revenue 30

Explanation / Answer

Answer to the Question

Point No.1

Point No.2

Point no.3(b)

2016 2017 Sales                       380,000                      480,000 COGS                       266,000                      312,000 Gross Profit                       114,000                      168,000

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