Amount of gross profit

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Ajax Company appropriately accounts for certain sales using the installment sales method. The perpetual inventory system is used. Information related to installment sales for 2016 and 2017 is as follows:

2016 2017 Sales $300,000 $400,000

Cost of sales 180,000 280,000

2017 sales - 150,000 2016 sales 120,000 100,000 Customer collections on:

Required:

  • Calculate the amount of gross profit that would be recognized each year on installment sales.
  • Prepare all necessary journal entries for each year.
  • Repeat requirements 1 and 2 assuming that Ajax uses the cost recovery method to account for its installment sales.

Reference no: EM13949227

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