Assume ID Cannot Estimate Uncollectible Accounts Accurately and Recognizes Revenue

question 20

Essay

Assume ID cannot estimate uncollectible accounts accurately and recognizes revenue using the installment method.
Required: Prepare journal entries to record the sale, cash collections, and recognition of gross profit (if appropriate) in 2008 and 2009.

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Definitions:

Promissory Note

A financial document in which one party promises in writing to pay a determinate sum of money to the other, either at a fixed or determinable future time or on demand of the payee, under specific terms.

Account Receivable

Resources that a company has yet to receive payment for from customers, regarding delivered goods or services.

Interest Revenue

Earnings received through the act of providing loans or putting money into assets that generate interest.

Notes Receivable

Short-term or long-term financial assets representing the promise of another party to pay a specific sum of money at a future date.