EXERCISE 18-11 (15-20 minutes)

(a)   Computation of gross profit recognized:

	2004	2005
$370,000 X 30%*	$111,000
$350,000 X 30%*		$105,000
$475,000 X 32%**	________	152,000
	$111,000	$257,000

        **($900,000 – $630,000) ÷ $900,000

        **($1,000,000 – $680,000) ÷ $1,000,000

(b)   Installment Accounts Receivable—2005......      1,000,000

                Installment Sales........................................                              1,000,000

        Cost of Installment Sales.................................         680,000

                Inventory......................................................                                 680,000

        Cash.....................................................................         825,000

                Installment Accounts Receivable—

                    2004..........................................................                                 350,000

                Installment Accounts Receivable—

                    2005..........................................................                                 475,000

        Installment Sales................................................      1,000,000

                Cost of Installment Sales.........................                                 680,000

                Deferred Gross Profit on Installment

                    Sales—2005............................................                                 320,000

        Deferred Gross Profit on Installment

          Sales—2004......................................................         105,000

        Deferred Gross Profit on Installment

            Sales—2005....................................................         152,000

                Realized Gross Profit on Installment

                    Sales.........................................................                                257,000

        Realized Gross Profit on Installment

            Sales.................................................................         257,000

                Income Summary.......................................                                 257,000