Mission Bay Sales, inc., accounts for its installment sales using the installment method of accounting. Periodic inventory system is used. The balances in the accounts for deferred interest and carrying charges on Installment Sales, installment contracts receivable and deferred gross profit at the beginning of the year, 2011 are :-

Deferred interest and carrying charges on installment sales $ 34,000

Installment contracts receivable –2009 $ 49,000

Installment contracts receivable –2010 $ 354,000

Deferred Gross Profit 2009 installmentSales $ 9,000

Deferred Gross Profit 2010 installmentSales $ 71,280

Transactions during the year are summarized as follows :-

Regular sales onaccount $ 350,000

Installment Sales (excluding interest and carrying charges $70,000) $ 690,000

Purchases(net) $ 686,000

Cost of installmentsales $ 483,000

Collection on regularsales $ 310,000

Collection on installment sales for 2009 (including interest andcarrying

charges of $3,500) $ 45,500

Collection on installment sales for 2010 (including interest andcarrying

charges of $20,000) $ 253,500

Collection on installment sales for 2011 (including interest andcarrying

charges of $15,000) $ 265,000

As regards to the gross profit rate on installment sales(excluding interest and carrying charges), it is known that 20% for2009 and 22% for 2010.

Instructions :

1. Prepare journal entries for the above transactions including theadjusting journal entries to record the gross profit realize duringthe year. Closing journal entries are not required.

2. Drawa partial income statement.

3. Show the following ledgeraccounts and the end of the year.

Computation forthe balances must be included.

Installmentcontract receivable 2009.

Installmentcontract receivable 2010.

Installmentcontract receivable 2011.

Deferred interestand carrying charges on installment sales.

Deferred grossprofit 2009 installment sales.

Deferred grossprofit 2010 installment sales.

Deferred grossprofit 2011 installment sales.

Answer rating: 100% (QA)

Certainly I can help you with that Heres the information you requested 1 Journal Entries a Regular Sales on Account Debit Accounts Receivable Regular ... View the full answer