On July 1, 2018, the Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the salecalled for a down payment of $75,000 and three annual installments of $75,000 due on each July 1, beginning July1, 2019. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. Theinventory cost Foster $120,000. The company uses the perpetual inventory system.Required:1. Prepare the necessary journal entries for 2018 and 2019 assuming revenue recognition upon delivery. Ignoreinterest charges.2. Repeat requirement 1 applying the installment sales method.3. Repeat requirement 1 applying the cost recovery method.
On July 1, 2018, the Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the sale
called for a down payment of $75,000 and three annual installments of $75,000 due on each July 1, beginning July
1, 2019. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The
inventory cost Foster $120,000. The company uses the perpetual inventory system.
Required:
1. Prepare the necessary
interest charges.
2. Repeat requirement 1 applying the installment sales method.
3. Repeat requirement 1 applying the cost recovery method.
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