Ford Appliance Center Records Revenue on the Installment Sales Method

Multiple Choice

Ford Appliance Center records revenue on the installment sales method. The following information is available for the first two years of business.
$\begin{array}{lrr}&\text { Year } 1&\text { Year } 2\\\text { Sales } & \$ \overline{200,000} & \$ 2 \overline{50,000} \\\text { Cost of goods sold } & 140,000 & 162,500 \\\text { Cash collections: } & & \\\quad \text { Year 1 sales } & 100,000 & 80,000 \\\quad \text { Year 2 sales } & & 130,000\end{array}$
-Which one of the following entries properly records realized gross profit on installment sales of Year 1 in Year 2?

A) DR Deferred gross profit-Year 1 $\quad$$\quad$ 60,000
DR Deferred gross profit-Year 2 $\quad$$\quad$ 87,500
CR Realized gross profit on installment sales $\quad$$\quad$ 147,500
B) DR Deferred gross profit Adjustment to Accounts $\quad$$\quad$ 24,000
Receivable-Year 1
CR Recognized gross profit on installment
sales-Year 1 $\quad$$\quad$ 24,000
C) DR Installment sales revenue $\quad$$\quad$ 69,500
CR Realized gross profit on installment sales $\quad$$\quad$ 69,500
D) DR Installment sales revenue $\quad$$\quad$ 87,500
CR Realized gross profit on installment sales $\quad$ 87,500