P18-8. (Installment-Sales Computations and Entries) Presented below is summarized information for Johnston Co., which sells merchandise on the installment basis. 2014 2015 2016 Sales (on installment plan) $250,000 $260,000 $280,000 Cost of sales 155,000 163,800 182,000 Gross profit $ 95,000 $ 96,200 $ 98,000 Collections from customers on: 2014 installment sales $ 75,000 $100,000 $ 50,000 2015 installment sales 100,000 120,000 2016 installment sales 100,000
Instructions
(a) Compute the realized gross profit for each of the years 2014, 2015, and 2016.
(b) Prepare all entries required in 2016, applying the installment-sales method of accounting. (Ignore interest charges.)
