Question

49. Income recognition when collection from the customer is uncertain. Furniture Retailers sells furniture to retail customers, offering extended payment terms. In January 2013, a customer buys a full set of dining room and living room furniture for $8,400 on an installment plan, with no down payment and monthly payments of $400, beginning January 31, 2013. The cost of the furniture to Furniture Retailers is $6,800. Furniture Retailers classifies Deferred Gross Margin as a liability on its balance sheet. Ignore interest on unpaid accounts receiv- able. What journal entries will Furniture Retailers make (1) at the time of sale in January 2013 and (2) when it receives each monthly payment from the customer under each of the following methods of recognizing revenue: a. Installment method. b. Cost recovery method.

Answer 1

Installment Soles Method Account Dobit ) ПHee Date ao13 8,400 Instal lment Reenoble s Installment Salor Jan &,400 Bung feniue god (ost of Gbdsdold nventoy (Bain (OGS recwded ) 6, eod installment Salos 8,400 Cost of Good, sele Deferved Cnos rn (Beny part in eyaued goo Cash Jon'31 God on'31 Daerm oes Morgin S 2 ISL income (Bany prot ootos Note Cross Pathh- 8UOD- 6EOD GPh on alas I6OD (9.0S &4G0 GP om SI52

Account TEler Date Credik 3on Inaa1ment Rocevableo (nstaUmauk Salos (ber Rinture 3al A) &4D Crood, Sotd Invents2 (Bun Cod recurded 6&00 Instollmat &oles &400 6&5D 600 Defe nod Croes Mo in (्ईo, जर्याण लते वजन्द ) ne ta Lmad Rocet voble