Ford Appliance Center records revenue on the installment sales method. The following information is available for the first two years of business.
$\begin{array}{lrr}&\text { Year } 1&\text { Year } 2\
\text { Sales } & \$ \overline{200,000} & \$ 2 \overline{50,000} \
\text { Cost of goods sold } & 140,000 & 162,500 \
\text { Cash collections: } & & \
\quad \text { Year 1 sales } & 100,000 & 80,000 \
\quad \text { Year 2 sales } & & 130,000
\end{array}$
-Which one of the following entries properly records the installment sales for Year 2?
A) $\begin{array}{ll}
\text { DR Accounts receivable-Year 1 } & 200,000 \
\text { DR Accounts receivable-Year 2 } & 250,000\\text { CR Realized gross profit on installment sales }&450,000
\end{array}$
B) DR Realized gross profit on installment sales $\quad$$\quad$250,000
CR Installment sales revenue$\quad$$\quad$250,000
C) DR Installment sales revenue$\quad$$\quad$250,000
CR Realized gross profit on installment sales$\quad$$\quad$250,000
D) DR Accounts receivable-Year 2$\quad$$\quad$250,000
CR Installment sales revenue$\quad$$\quad$250,000

Question

Quizplus · Accepted Answer

The correct entry to record installment sales for Year 2 involves debiting Accounts Receivable for the amount of the sales ($250,000) and crediting Installment Sales Revenue for the same amount. This entry recognizes the receivable and the revenue from the installment sales in Year 2.

Ford Appliance Center Records Revenue on the Installment Sales Method