Sales Under the Installment Method
Response to the following problem:
The following information is available for the Dassler Company, which began its operations in 2010:
1. Installment method sales
2010 $520,000
2011 600,000
2. Gross profit percentage
2010 20%
2011 24%
3. Cash collections on installment method sales
2010 25% of 2010 sales
2011 55% of 2010 sales
30% of 2011 sales
4. Bad debt policy
The company estimates its bad debts to be 2% of installment method sales.
5. Defaults and repossessions
2010 $10,000 of 2010 installment method sales, of which $1,000 had been collected
2011 $20,000 of 2010 installment method sales, of which $4,000 had been collected
$15,000 of 2011 installment method sales, of which $2,000 had been collected
The policy of the company is to value repossessed items at 40% of their original selling price.
Required
Prepare the journal entries for 2010 and 2011.