Question: (Installment-Sales Computation and Entries-Periodic Inventory) Mantle Inc. sells merchandise for cash and also on the installment plan. Entries to record cost of goods sold are made at the end of each year. Repossessions of merchandise (sold in 2014) were made in 2015 and were recorded correctly as follows.
Deferred Gross Profit, 2014 7,200
Repossessed Merchandise 8,000
Loss on Repossession 2,800
Installment Accounts Receivables, 2014 18,000
Part of this repossessed merchandise was sold for cash during 2015, and the sale was recorded by a debit to Cash and a credit to Sales Revenue. The inventory of repossessed merchandise on hand December 31, 2015, is $4,000; of new merchandise, $127,400. There was no repossessed merchandise on hand January 1, 2015. Collections on accounts receivable during 2015 were: Installment Accounts Receivable, 2014 $80,000 Installment Accounts Receivable, 2015 50,000 The cost of the merchandise sold under the installment plan during 2015 was $111,600. The rate of gross profit on 2014 and on 2015 installment sales can be computed from the information given
(a) From the trial balance and other information given above, prepare adjusting and closing entries as of December 31, 2015.
(b) Prepare an income statement for the year ended December 31, 2015. Include only the realized gross profit in the income statement.