Mantle Inc. sells merchandise for cash and also on the installment plan. Entries to record cost of goods sold are made at the end of each year.\nReposs
Mantle Inc. sells merchandise for cash and also on the installment plan. Entries to record cost of goods sold are made at the end of each year.
\r\nRepossessions of merchandise (sold in 2014) were made in 2015 and were recorded correctly as follows.
\r\nDeferred Gross Profi t, 2014 7,200
\r\nRepossessed Merchandise 8,000
\r\nLoss on Repossession 2,800
\r\nInstallment Accounts Receivable, 2014 18,000
\r\nPart of this repossessed merchandise was sold for cash during 2015, and the sale was recorded by a debit to Cash and a credit to Sales Revenue. The inventory of repossessed merchandise on hand December 31, 2015, is $4,000; of new merchandise, $127,400. There was no repossessed merchandise on hand January 1, 2015. Collections on accounts receivable during 2015 were:
\r\nInstallment Accounts Receivable, 2014 $80,000
\r\nInstallment Accounts Receivable, 2015 50,000
\r\nThe cost of the merchandise sold under the installment plan during 2015 was $111,600. The rate of gross profit on 2014 and on 2015 installment sales can be computed from the information given.
\r\nMANTLE INC.
\r\nTRIAL BALANCE
\r\nDECEMBER 31, 2015
\r\nDr. Cr.
\r\nCash $118,400
\r\nInstallment Accounts Receivable, 2014 80,000
\r\nInstallment Accounts Receivable, 2015 130,000
\r\nInventory, Jan. 1, 2015 120,000
\r\nRepossessed Merchandise 8,000
\r\nAccounts Payable $ 47,200
\r\nDeferred Gross Profi t, 2014 64,000
\r\nCommon Stock 200,000
\r\nRetained Earnings 40,000
\r\nSales Revenue 400,000
\r\nInstallment Sales 180,000
\r\nPurchases 360,000
\r\nLoss on Repossession 2,800
\r\nOperating Expenses 112,000
\r\n$931,200 $931,200
\r\nInstructions
\r\n(a) From the trial balance and other information given above, prepare adjusting and closing entries as of December 31, 2015.
\r\n(b) Prepare an income statement for the year ended December 31, 2015. Include only the realized gross profit in the income statement.