Question

On July 1, 2016, the Foster Company sold inventory to the Slate Corporation for $280,000. Terms of the sale called for a down payment of $70,000 and three annual installments of $70,000 due on each July 1, beginning July 1, 2017. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The inventory cost Foster $109,200. The company uses the perpetual inventory system. Required: 1. Prepare the necessary journal entries for 2016 and 2017 using point of delivery revenue recognition. Ignore interest charges. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Record the installment sale of $280,000 using the point of delivery method 1 thod Record the $109,200 cost of the installment sale using the point of delivery method 2 Record the cash collection of $70,000 using the point of delivery method 3 Credit Record the cash collection of $70,000 using the point of delivery method. 4

Answer 1

1) Journal Entries using point of delivery revenue recognition: Date Accounts and Explanations 1) Installment Receivable Debit (S) Credit (S) 280,000 Sales Revenue 280,000 To record the installment sales) 2) Cost of goods sold 3) Cash 4Cash 109.200 Inventory (To record the cost of installment sales) 109,200 70,000 Installment Receivables 70,000 To record the cash collections from 2016 installment sales) 70,000 Installment Receivables 70,000 To record the cash collections from 2017 installment sales)