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 cost of installment goods sold for Year 2?
A) DR Cost of installment goods sold $\quad$162,500
CR Inventory$\quad$$\quad$162,500
B) DR Cost of installment goods sold $\quad 302,500$
CR Inventory$\quad$$\quad$302,500
C) DR Cost of installment goods sold$\quad$$\quad$162,500
CR Installment sales revenue$\quad$$\quad$162,500
D) DR Cost of installment goods sold$\quad$$\quad$302,500
CR Installment sales revenue$\quad$$\quad$302,500

Question

Quizplus · Accepted Answer

The correct entry for recording the cost of installment goods sold for Year 2 is to debit the Cost of Installment Goods Sold and credit Inventory for the amount related to Year 2 sales, which is $162,500. This reflects the cost of the goods that were sold on installment in Year 2.

Ford Appliance Center Records Revenue on the Installment Sales Method