Sanchez Development Company uses the installment sales method to account for some of its installment sales.On October 1, 2018, Sanchez sold a parcel of land to the Kreuze Corporation for $4 million. This amount wasnot considered significant relative to Sanchez’s other sales during 2018. The land had cost Sanchez $1.8 millionto acquire and develop. Terms of the sale required a down payment of $800,000 and four annual payments of$800,000 plus interest at an appropriate interest rate, with payments due on each October 1 beginning in 2019.Kreuze paid the down payment, but on October 1, 2019, defaulted on the remainder of the contract. Sanchezrepossessed the land. On the date of repossession the land had a fair value of $1.3 million.Required:Prepare the necessary entries for Sanchez to record the sale, receipt of the down payment, and the default andrepossession applying the installment sales method. Ignore interest charges.On April 1, 2018, the Apex Corporation sold a parcel of underdeveloped land to the Applegate ConstructionCompany for $2,400,000. The book value of the land on Apex’s books was $480,000. Terms of the sale required adown payment of $120,000 and 19 annual payments of $120,000 plus interest at an appropriate interest rate due oneach April 1 beginning in 2019. Apex has no significant obligations to perform services after the sale.
Sanchez Development Company uses the installment sales method to account for some of its installment sales.
On October 1, 2018, Sanchez sold a parcel of land to the Kreuze Corporation for $4 million. This amount was
not considered significant relative to Sanchez’s other sales during 2018. The land had cost Sanchez $1.8 million
to acquire and develop. Terms of the sale required a down payment of $800,000 and four annual payments of
$800,000 plus interest at an appropriate interest rate, with payments due on each October 1 beginning in 2019.
Kreuze paid the down payment, but on October 1, 2019, defaulted on the remainder of the contract. Sanchez
repossessed the land. On the date of repossession the land had a fair value of $1.3 million.
Required:
Prepare the necessary entries for Sanchez to record the sale, receipt of the down payment, and the default and
repossession applying the installment sales method. Ignore interest charges.
On April 1, 2018, the Apex Corporation sold a parcel of underdeveloped land to the Applegate Construction
Company for $2,400,000. The book value of the land on Apex’s books was $480,000. Terms of the sale required a
down payment of $120,000 and 19 annual payments of $120,000 plus interest at an appropriate interest rate due on
each April 1 beginning in 2019. Apex has no significant obligations to perform services after the sale.
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