A firm sold merchandise costing $600 for $1,000 on January 1, 2001. The selling firm accepted a note with terms calling for two equal annual payments (which include 10% interest, and principal) beginning December 31, 2001. There is sufficient uncertainty about the realizability of the two payments to warrant the instalment method of revenue recognition.
Required:
assuming the 2 payments were received as expected, provide the entries to account for the sale and cash collections (assume a perpetual inventory system).

Question

Quizplus · Accepted Answer

The Answer of A firm sold merchandise costing $600 for $1,000 on January 1, 2001. The selling firm accepted a note with terms calling for two equal annual payments (which include 10% interest, and principal) beginning December 31, 2001. There is sufficient uncertainty about the realizability of the two payments to warrant the instalment method of revenue recognition.
Required:
assuming the 2 payments were received as expected, provide the entries to account for the sale and cash collections (assume a perpetual inventory system).

A Firm Sold Merchandise Costing $600 for $1,000 on January