Installment Sales—Default and Repossession Crawford Imports Inc. was involved in two default and...

Question

Installment Sales—Default and Repossession Crawford Imports Inc. was involved in two default and repossession cases during the year:
1. A refrigerator was sold to Cindy McClary for $1,800, including a 30% markup on selling price. McClary made a down payment of 20%, four of the remaining 16 equal payments, and then defaulted on further payments. The refrigerator was repossessed, at which time the fair value was determined to be $800.
2. An oven that cost $1,200 was sold to Travis Longman for $1,500 on the installment basis. Longman made a down payment of $240 and paid $80 a month for six months, after which he defaulted. The oven was repossessed and the estimated fair value at time of repossession was determined to be $750. Prepare journal entries to record each of these repossessions using a fair value approach. (Ignore interest charges.)

Robert · Accepted Answer

SOLUTION 1: 
Sale price: 1,800  
20% down payment: 360  
16 payments totaling: 1,440 or $90 per payment 
4 installment payments: 360  
Balance A/R: 1,080  
30% is deferred gross profit: 324  
Journal Entry:

Installment Sales—Default and Repossession Crawford Imports Inc. was involved in two default and repossession cases during the year: 1. A refrigerator was sold to Cindy McClary for $1,800, including a...

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