Recording the fair value of the repossessed merchandise , Accounting Basics

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Recording the fair value of the repossessed merchandise

Response to the following problem:

Lazaro Inc. sells goods on the installment basis and uses the installment-sales method. Due to a customer default, Lazaro repossessed merchandise that was originally sold for $800, resulting in a gross profit rate of 40%. At the time of repossession, the uncollected balance is $520, and the fair value of the repossessed merchandise is $275.

Prepare Lazaro's entry to record the repossession.

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Accounting Basics: Recording the fair value of the repossessed merchandise

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