E 5-2 Installment sales method
Charter Corporation, which began business in 2011, appropriately uses the installment sales method of accounting for its installment sales. The following data were obtained for sales made during 2011 and 2012:
2011 2012 Installment sales $360,000 $350,000 Cost of installment sales 234,000 245,000 Cash collections on installment sales during 2011 150,000 100,000 2011 – 120,000
Required:
1. How much gross profit should Charter recognize in 2011 and 2012 from installment sales?
2. What should be the balance in the deferred gross profit account at the end of 2011 and 2012?
