Question:
On 12/31/07, Company A sold equipment for $1,800,000. The equipment had a carrying amount of $1,200,000. At the time of the sale the buyer paid $300,000 cash and signed a $1,500,000 note bearing interest of $1,500,000 note bearing interest at 10% payable in five annual installments of $300,000. Company A accounts for the sale under the INSTALLMENT METHOD. On 12/31/08 the buyer paid $300,000 principal and $150,000 interest. What are the journal entries for Company A at the time of the sale?
I am note sure whether the interest should be included in the Installment Receivables / Deferred Gross Profit amounts or if interest is entered separately.
This is a CPA question that asks about the amount of revenue that should be recognized on 12/31/08 but I need clarity on how to do the journal entries.