Amount of gross profit, Ajax Company appropriately accounts

Amount of gross profit

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Reference no: EM13949227

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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