SUPPLEMENT EXERCISES
Exercise 5–23
Requirement 1
2018 cost recovery %:
$234,000
2019 cost recovery %:
$245,000
2018 gross profit:
Cash collection from 2018 sales of $150,000 x 35% = $52 ,500
2019 gross profit:
Cash collection from 2018 sales of $100,000 x 35% = $35,000
Exercise 5–23 (concluded)
Requirement 2
2018 deferred gross profit balance:
2018 initial gross profit ($360,000 – 234,000) $126,000
2019 deferred gross profit balance:
2018 initial gross profit ($360,000 – 234,000) $126,000
2019 initial gross profit ($350,000 – 245,000) 105,000
Exercise 5–24
2018
Installment receivables…………………………………………… 360,000
To record installment sales
2018
To record cash collections from installment sales
2018
To recognize gross profit from installment sales
2019
Installment receivables…………………………………………… 350,000
To record installment sales
2019
To record cash collections from installment sales
2019
To recognize gross profit from installment sales
Exercise 5–25
Requirement 1
Year Income recognized
2018 $180,000 ($300,000 – 120,000)
Total $180 ,000
Requirement 2
Cost recovery %:
Year Cash Collected Cost Recovery(40%) Gross Profit(60%)
2018 $ 75,000 $ 30,000 $ 45,000
Requirement 3
Year Cash Collected Cost Recovery Gross Profit
2018 $ 75,000 $ 75,000 – 0 –
Totals $300,000 $120 ,000 $180,000
Exercise 5–26
Requirement 1
July 1, 2018
To record installment sale
To record cost of installment sale
To record cash collection from installment sale
July 1, 2019
To record cash collection from installment sale
Exercise 5–26 (continued)
Requirement 2
July 1, 2018
Installment receivables…………………………………………… 300,000
To record installment sale
To record cash collection from installment sale
To recognize gross profit from installment sale
July 1, 2019
To record cash collection from installment sale
To recognize gross profit from installment sale
Exercise 5–26 (concluded)
Requirement 3
July 1, 2018
Installment receivables…………………………………………… 300,000
To record installment sale
To record cash collection from installment sale
July 1, 2019
To record cash collection from installment sale
To recognize gross profit from installment sale
Exercise 5–27
Requirement 1
Cost of goods sold ($1,000,000 – 600,000) $400,000
Requirement 2
Gross profit percentage = $600,000 ÷ $1,000,000 = 60%
Exercise 5–28
October 1, 2018
Installment receivable……………………………………………… 4,000,000
To record the installment sale
To record the cash down payment from installment sale
To recognize gross profit from installment sale
October 1, 2019
Repossessed inventory (fair value) ………………………….. 1,300,000
To record the default and repossession…………………..
*$2,200,000 $4,000,000 = 55% gross profit percentage
Exercise 5–29
Requirement 1
April 1, 2018
Installment receivables…………………………………………… 2,400,000
1,920,000
To record installment sale
April 1, 2018
To record cash collection from installment sale
April 1, 2019
To record cash collection from installment sale
Requirement 2
April 1, 2018
Installment receivables…………………………………………… 2,400,000
1,920,000
To record installment sale