INSTALLMENT SALES
A. Determining Gross Profit Rates:
DGP Beginning of current year
For prior year:
Installment AR Beginning of
current year
Gross Profit
Installment Sales
P xxx
xxx
P xxx
xxx
P xxx
xx%
xxx
P
xxx
xxx
xxx
P
xxx
xxx
xxx
xxx
xxx
xxx
xxx
P xxx
xxx
xxx
xxx
xxx
Over/(Under) allowance:
P xxx
PROBLEMS:
1.
c.
d.
2. Wan Pisu Enterprises uses the installment method of accounting and it has the following
data at the year-end:
Gross margin on cost
66.67%
Unrealized gross profit
P192,000
Cash collection including down payments 360,000
What was the total amount of sales on installment basis?
a. P480,000
b. 552,000
c.
d.
P648,000
840,000
3. Spoderman Corporation, which began business on January 1, 2011, appropriately uses the
installment sales method of accounting. The following data are available:
12/31/2011 12/31/2012
Balance of deferred gross profit on sales account:
2011
P300,000
P120,000
2012
440,000
Gross profit rate on sales
30%
40%
The installment accounts receivable balance at December 31, 2012 is:
a. P1,000,000
b. P1,100,000
c.
d.
P1,400,000
1,500,000
4. Gorabels Inc. started operation at the beginning of 2012, selling home appliances
exclusively on installment basis. Data for 2011 and 2012 follows:
2011
2012
Installment sales
P600,000
P750,000
420,000
450,000
285,000
22,500
300,000
On May 31, 2012, a 2011 installment account of P37,500 was defaulted and the appliance
was repossessed. After reconditioning at a cost of P750, the repossessed appliance would
be priced to sell for P30,000.
The gain (loss) on repossession amounted to:
a. P3,000
b. (9,000)
c.
d.
P9,000
(3,750)
5. Khaleesi Co. employs the perpetual inventory basis in its accounting for new cars. On August
15, 2011, a new car was sold to Hodor with a list price of P220,000 costing 165,000. It grants
Mr. Hodor an allowance of P85,000 for her old car as trade-in, the current value of which was
estimated to be P81,700. The balance of 135,000 was payable as follows: cash at time of
Purchase P35,000, balance in 20 monthly payment of P5000, first payment being made on
September 1, 2011. On April 1, 2012, Mr. Hodor defaulted in the payment of March 1, 2012
installment. The new car sold was repossessed; its value to the seller is P40,000 after
reconditioning cost of P5000. (use two decimal places for gross profit percentage)
(1) The total realized gross profit n installment sales in 2011 (2) gain(loss) on repossession in 2012.
a. (1) P32,617; (2) P(8,298)
b. (1) 37,889; (2) 8,298
c.
d.