Red Sox Company has the following sales of land and cash collections:
In 2010, there was the sale of Bux Land for $3,000,000 that cost them $1,500,000. The purchase agreement required that payments be made of $1,200,000 when there are tenants on the land and the following payment of $1,200,000 be made in 2011.
In 2011, there was the sale of Spokane County land for $2,700,000 which cost Red Sox $1,800,000. The payments were required were $900,000 when development started on the land and then the final payments of $600,000 in 2012 and 2013. Red Sox had cash collections of the $900,000 and a payment of $700,000 for Bux Land.
Additional Facts:
You will assume that Red Sox Company can estimate with ease the uncollectible accounts and then accrues the bad debts of 7% of sales and will recognize the revenue upon the transfer of title.
Prepare the journal entries to record the sales, cash collections and recognition of gross profit only if appropritate in the years 2010, and 2011.