Installment-Sales Computations and Schedules Saprano Company, on January 2, 2010, entered into a contract with a manufacturing company to purchase room-size air conditioners and to sell the units on an installment plan with collections over approximately 30 months with no carrying charge. For income tax purposes Saprano Company elected to report income from its sales of air conditioners according to the installment-sales method. Purchases and sales of new units were as follows.
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Collections on installment sales were as follows.
In 2012, 50 units from the 2011 sales were repossessed and sold for $120 each on the installment plan. At the time of repossession, $2,000 had been collected from the original purchasers, and the units had a fair value of $3,000. General and administrative expenses for 2012 were $60,000. No charge has been made against current income for the applicable insurance expense from a 3-year policy expiring June 30, 2013, costing $7,200, and for an advance payment of $12,000 on a new contract to purchase air conditioners beginning January 2, 2013. Assuming that the weighted-average method is used for determining the inventory cost, including repossessed merchandise, prepare schedules computing for 2010, 2011, and 2012:
(a) (1) The cost of goods sold on installments.
(2) The average unit cost of goods sold on installments for each year.
(b) The gross profit percentages for 2010, 2011, and 2012.
(c) The gain or loss on repossessions in 2012.
(d) The net income from installment sales for 2012. (Ignore income taxes.)
(AICPAadapted)