installement sales computations and entries

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 profi t $ 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.)