Ford Appliance Center Records Revenue on the Installment Sales Method

question 22

Multiple Choice

Ford Appliance Center records revenue on the installment sales method. The following information is available for the first two years of business.
$\begin{array}{lrr}&\text { Year } 1&\text { Year } 2\\\text { Sales } & \$ \overline{200,000} & \$ 2 \overline{50,000} \\\text { Cost of goods sold } & 140,000 & 162,500 \\\text { Cash collections: } & & \\\quad \text { Year 1 sales } & 100,000 & 80,000 \\\quad \text { Year 2 sales } & & 130,000\end{array}$
-Which one of the following entries properly records the installment sales for Year 2?

• A) \(\begin{array}{ll}
• \text { DR Accounts receivable-Year 1 } & 200,000 \\
• \text { DR Accounts receivable-Year 2 } & 250,000\\\text { CR Realized gross profit on installment sales }&450,000
• \end{array}\)
• B) DR Realized gross profit on installment sales \(\quad\)\(\quad\)250,000
• CR Installment sales revenue\(\quad\)\(\quad\)250,000
• C) DR Installment sales revenue\(\quad\)\(\quad\)250,000
• CR Realized gross profit on installment sales\(\quad\)\(\quad\)250,000
• D) DR Accounts receivable-Year 2\(\quad\)\(\quad\)250,000
• CR Installment sales revenue\(\quad\)\(\quad\)250,000

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