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Find the amount of the adjustment on inventory

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Reference no: EM132755640

Question - J&B Co. which sells in installment basis, recognizes at year-end, gross profit based on collections made

Installment Receivable: Jan 1. Dec. 31

19x7 120,0000 0

19x8 1,722,300 337,200

19x9 2,050,450

19x7 19x8 19x9

Sales 1,900,000 2,160,000 3,010,000

Cost of sales 1,235,000 1,425,000 1,896,300

In 19x9, the company repossessed merchandise with a resale value of 8,500 from a customer who defaulted on hispayments. The account was incurred for 27,000 in 19x8, and 16,000 had been paid prior to the default. As collections are made, the company debits CASH and credits the related INSTALLMENT RECEIVABLE; for defaults, the company debits INVENTORY OF REPOSSESSED MERCHANDISE and also credits the related INSTALLMENT RECEIVABLE account.

Find the amount of the adjustment on Inventory of Repossessed Merchandise?

a. 0

b. 2,500

c. 3,740

d. 5,645

Reference no: EM132755640

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