E 5-5 Journal entries; point of delivery, installment sales, and cost recovery methods
[This is a variation of Exercise 5-4 focusing on journal entries.]
E 5-5 FosterCompany entries; point of delivery, installment sales, and cost recovery methods
On July 1, 2011, the Foster Company sold inventory to the Slate Corporation for $300,000. Terms of the sale called for a down payment of $75,000 and three annual installments of $75,000 due on each July 1, beginning July 1, 2012. Each installment also will include interest on the unpaid balance applying an appropriate interest rate. The inventory cost Foster $120,000. The company uses the perpetual inventory system.
Required:
1. Prepare the necessary journal entries for 2011 and 2012 using point of delivery revenue recognition. Ignore interest charges.
2. Repeat requirement 1 applying the installment sales method.
3. Repeat requirement 1 applying the cost recovery method.
