Transcribed Image Text
On August 31, 2016, the Silva Company sold merchandise to theBendix Corporation for $650,000. Terms of the sale called for adown payment of $130,000 and four annual installments of $130,000due on each August 31, beginning August 31, 2017. Each installmentalso will include interest on the unpaid balance applying anappropriate interest rate. The book value of the merchandise onSilva's books on the date of sale was $390,000. The perpetualinventory system is used. The company's fiscal year-end is December31.Required:1.Complete the table below by entering the amount of gross profitto be recognized in each of the five years of the installment saleapplying each of the following methods:a. Point of delivery revenue recognition.b. Installment sales method.c. Cost recovery method. 2.Prepare journal entries for each of the five years applying forthe three revenue recognition methods. Ignore interest charges. 3.Prepare a partial balance sheet as of the end of 2016 and 2017listing the items related to the installment sale applying each ofthe above three methods.