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Ruxton, Inc. accounts for all sales of its merchandise on the installment basis. Following is the unadjusted trial balance at 12/31/09:

Ruxton, Inc. accounts for all sales of its merchandise on the installment basis. Following is the unadjusted trial balance at 12/31/09:

Cash $ 90,200
Installment Accounts Receivable—2007 170,000
Installment Accounts Receivable—2008 400,000
Installment Accounts Receivable—2009 750,000
Inventory, 1/1/05 78,000
Repossessed Merchandise 22,000
Accounts Payable $ 136,000
Deferred Gross Profit—2003 84,000
Deferred Gross Profit—2004 195,000
Capital Stock 600,000
Retained Earnings 406,200
Installment Sales 1,000,000
Purchases 758,000
Loss on Repossession 3,000
Operating Expenses 150,000
$2,421,000 $2,421,000

Additional Data: 2007 Gross Profit Rate = 30%; Inventory 12/31/09 = $158,000; Repossessed merchandise 12/31/09 = $15,000;
Merchandise sold in 2008 was repossessed in 2009 and the following entry was prepared (assume correctly):
Deferred Gross Profit—2008 15,000
Repossessed Merchandise 22,000
Loss on Repossession 3,000
Installment Accounts Receivable—2008 40,000
Instructions
(a) Determine collections during 2009 on Installment A/R for each of the years 2007, 2008, and 2009.
(b) Without prejudice to your answer in Part (a), assume that total collections on Installment Accounts Receivable during 2009 were $1,060,000; $220,000 from 2007, $300,000 from 2008, and $540,000 from 2009. Prepare all necessary adjusting and closing entries at 12/31/09.

This question was asked on Mar 16, 2010.

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