E 5-7 Installment sales; default and repossession This problem is found in Intermediate Accounting, 5th Edition, Spiceland, Sepe, Nelson, Tomassini,

E 5-7Installment sales; default and repossessionThis problem is found in Intermediate Accounting, 5th Edition, Spiceland, Sepe, Nelson, Tomassini, copyright 2009Sanchez Development Company uses the installment sales method to account for some of its installment sales. On October 1, 2009, Sanchez sold a parcel of land to the Kreuze Corporation for $4 million. This amount was not considered significant relative to Sanchez’s other sales during 2009. The land had cost Sanchez $1.8 million to acquire and develop. Terms of the sale required a down payment of $800,000 and four annual payments of $800,000 plus interest at an appropriate interest rate, with payments due on each October 1 beginning in 2010. Krueze paid the down payment, but on October 1, 2010, defaulted on the remainder of the contract. Sanchez repossessed the land. On the date of repossession the land had a fair value of $1.3 million.Required:Prepare the necessary entries for Sanchez to record the sale, receipt of the down payment, and the default and repossession applying the installment sales method. Ignore interest charges.