On October 2, 2007 the Television Company sold a set costing $400 to Jones for $600. Jones made a down payment of $150 and agreed to pay $25 the first of each month for 18 months thereafter. Jones paid the first two installments due on November 1 and December 1, 2007. In 2008 Jones made five payments, but then defaulted on the balance of the payments. The set was repossessed on November 1, 2008. The company closes its books as of December 31.
Required
1. Give three different amounts that might be shown as realized income for 2007 and indicate the circumstances under which each of these amounts would be acceptable.
2. Assuming that the repossessed television set has a wholesale value of $50 and a retail value of $75, prepare a journal entry to record the repossession under the “installment method” of accounting. Explain fully the reasoning applicable to your entry.