Ajax Company appropriately accounts for certain sales using the installment sales method. The perpetual inventory system is used. Information related to installment sales for 2016 and 2017 is as follows:
2016 2017
Sales $ 390,000 $ 490,000
Cost of sales 234,000 343,000
Customer collections on:
2016 sales 165,000 145,000
2017 sales ? 195,000
Required:
1. Calculate the amount of gross profit that would be recognized each year from installment sales.
2. Prepare all necessary journal entries for the year 2016 and 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Assume that Ajax uses the cost recovery method to account for its installment sales.
3-a. Compute the following:
3-b. Prepare all necessary journal entries for the year 2016 and 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)