[4 points] Omega Corporation had installment sales of $2,000,000 and cost of installment sales of $1,400,000 in 2019. A 2019 sale resulted in a default in 2021, at which time the balance of the installment receivable was $60,000. The repossessed merchandise had a fair value of $30,000. a. Calculate the rate of gross profit on 2019 installment sales. b. Make the entry to record the repossession.

[4 points] Omega Corporation had installment sales of $2,000,000 and cost of installment sales of $1,400,000 in 2019. A 2019 sale resulted in a default in 2021, at which time the balance of the installment receivable was $60,000. The repossessed merchandise had a fair value of $30,000. a. Calculate the rate of gross profit on 2019 installment sales. b. Make the entry to record the repossession.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 10MC: On January 1, 2019, Park Company accepted a 36,000, non-interest-bearing, 3-year note from a major...

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Comprehensive Notes Receivable On January 1, 2019, Seaver Company sold land with a book value of 23,000 to Bench Company. Bench paid 15,000 down and signed a 15,000 non-interest-bearing note, payable in two 7,500 annual installments on December 31, 2019, and 2020. Neither the fair value of the land nor of the note is determinable. Benchs incremental borrowing rate is 12%. Later in the year, on July 1, 2019, Seaver sold a building to Hane Company, accepting a 2-year, 100,000 non-interest-bearing note due July 1, 2021. The fair value of the building was 82,644.00 on the date of the sale. The building had been purchased at a cost of 90,000 on January 1, 2014, and had a book value of 67,500 on December 31, 2018. It was being depreciated on a straight-line basis (no residual value) over a 20-year life. Required: 1. Prepare all the journal entries on Seavers books for January 1, 2019, through December 31, 2020, in regard to the Bench note. 2. Prepare all the journal entries on Seavers books for July 1, 2019, through July 1, 2021, in regard to the Hane note. 3. Prepare the notes receivable portion of Seavers balance sheet on December 31, 2019 and 2020.
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[4 points] Omega Corporation had installment sales of $2,000,000 and cost of installment sales of $1,400,000 in 2019. A 2019 sale resulted in a default in 2021, at which time the balance of the installment receivable was $60,000. The repossessed merchandise had a fair value of $30,000. a. Calculate the rate of gross profit on 2019 installment sales. b. Make the entry to record the repossession.
Answer
MAGIGING CPA AKO Co. uses the installment method. MAGIGING CPA AKO Co.'s records show the following balances: Installment Receivables - Jan. 1, 2020 0 Installment Sales 1,000,000 Cost of Sales 800,000 Installment Receivables - Dec. 31, 2020 600,000 How much is the realized gross profit for the year 2020? How much is the deferred gross profit on December 31,2020?
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