Republic distributors appropriately uses the

Question

(Analysis of Installment-Sales Accounts)

Republic Distributors. appropriately uses the installment-sales method of accounting. On December 31, 2014, the books show balances as follows.

Installment Receivables                   Deferred Gross Profit                         Gross Profit on Sales

2012                                                $  85,000 $56,800                                            26%

2013                                                  140,000 80,200                                              22%

2014                                                    60,000 45,000                                              25%

Instructions

(a) Prepare the adjusting entry or entries required on December 31, 2014, to recognize 2014 realized gross profit. (Installment receivables have already been credited for cash receipts during 2014.)

(b) Compute the amount of cash collected in 2014 on accounts receivable each year.