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INSTALLMENT SALES

Problem 1
Arriola Inc. which began operations on January 2, 2017, appropriately uses the installment method of accounting. The following information pertains
to Arriola perations for 2017:

Installment Sales P1,000,000


Regular Sales 600,000
Cost of Installment Sales 500,000
Cost of Regular Sales 300,000
Operating Expenses 100,000
Collections on Installment Sales 200,000

In its December 31, 2017, what amount should Suarez, Inc report as deferred gross profit?

Problem 2
On January 2, 2017, Cuares Company sold a car to Mr. JD for P1,050,000. On this date, the car cost P735,000. Mr. JD paid P150,000 as down payment
and signed a P900,000 interest bearing note at 10%. The note was payable in three annual installments of P300,000 beginning January 1, 2018. Mr.
JD made a timely payment for the first installment on January 1, 2017 of P390,000 which included interest of P90,000 to date of payment. Cuares
Company uses installment method of accounting.

In its December 31, 2017 Statement of Financial Position, what amount should Cuares Company report as deferred gross profit?

Problem 3
The books of Lee Company, Inc, show the following balances on December 31, 2017:

Accounts Receivable P1,255,000


Deferred Gross Profit (before Adjustment) 152,000

Analysis and aging of the accounts receivable reveal the following:

Regular Accounts P930,000


2016 Installment accounts 65,000
2017 Installment accounts 360,000

Sales on an installment basis in 2016 were made at 30% above cost, in 2017, at 33 1/3% above cost.

What is the total realized gross profit for the year ended December 31, 2017?

Problem 4
Dating Company sold goods on installment. For the year just ended, the following were reported:
Installment Sales P6,000,000
Cost of Installment Sales 4,050,000
Collections on Installment Sales 3,600,000
Repossessed accounts 400,000
Fair Value of the repossessed merchandise 240,000

What is the loss on repossession?

How much is the realized gross profit for the year ended?

How much is the deferred gross profit for the year ended?

Problem 5
Bonus Company sold computer equipment on installment basis on October 1, 2017. The cost to the company was P60, 000 but the installment sales
price was set at P85,000. Terms of the payment included the acceptance of a used computer equipment with a trade in value of P30,000. Cash of
P5,000 was paid in addition to the trade-in equipment with the balance to be paid in ten monthly installment due at the end of each month
commencing the month of sale. The estimated selling price of the used computer equipment after reconditioning cost of P1,250 is P25,000. A 15%
gross profit was usual from the sale of used equipment.

What is the gross profit to be realized from the 2017 collections?

Problem 6
Garcia Motor sells cars both on installment and cash basis. On March 30, 2017, Garcia motors sold a car to Mr. Tom for P525,000 costing P414,000.
A used car is accepted as down payment, P128,000 being allowed on the trade-in. The used car can be resold for P160,200 after reconditioning cost
of P7,660. The company expects to make a 20% gross profit on the sale of a used car. The balance of the sale is to be paid on a 10-month installment
basis starting May 1, 2017.

Mr. Tom defaulted payment starting November 1, 2017. And the car was immediately repossessed. The repossessed car was appraised at a value of
P93,750 at the time of repossession. Garcia motors had to incur additional cost of repairs amounting to P9,250 before the car was subsequently
resold on December 1, 2017 for P128, 750 to Mr. Lim.

What is the realized gross profit on December 31, 2017?

What is the net income for the year ended December 31, 2017?

Problem 7
Thor following selected accounts were taken from the trial balance of Paulyne Company as of December 31, 2017:
Accounts Receivable P 750,000
Installment Receivable-2015 150,000
Installment Receivable-2016 450,000
Installment Receivable-2017 2,700,000
Merchandise Inventory 525,000
Purchases 3,900,000
Freight in 30,000
Repossessed Merchandise 150,000
Repossession Loss 240,000
Cash Sales 900,000
Charge Sales 1,800,000
Installment Sales 4,460,000
Deferred Gross Profit-2015 222,000
Deferred Gross Profit-2016 393,600
Operating Expenses 150,000
Shipment on Installment Sales 2,787,500

Additional Information:
Gross profit rates for 2015 and 2016 installment sales were 30% and 32%, respectively.
The entry for repossessed goods was:
Repossessed Merchandise 150,000
Repossession Loss 240,000
Installment Receivable-2015 180,000
Installment Receivable-2016 210,000
Merchandise on hand at the end of 2017 (new and repossessed) was P282,000.

a. Total Realized Gross Profit in 2017


b.
c. Balance of Deferred Gross Profit as of December 31, 2017

d. Net Income in 2017

Problem 8

Layson Company which began operations on January 1, 2017 appropriately uses the installment method of accounting. The following data pertain to
Layson operations for year 2017.

Installment Sales (before over/under-allowance P3,150,000


Operating Expenses 367,500
Regular Sales 1,312,500
Total Collections during the year (excluding interest
of P84,000) 2,088,000
Cost of regular sales 752,500
Cost of installment sales 2,205,000
Accounts Receivable-12/31/2017 512,500
Installment Receivable written-off (no provision
was made) 154,000
Estimated resale value of repossessed goods 290,000
Profit usual on the sale of repossessed goods 15%
Repossessed Accounts 350,000
Actual value of trade-in Merchandise 280,000
Trade-in Allowance 490,000
Reconditioning Cost of the repossessed goods 57,500

How much is the deferred gross profit at December 31, 2017?

What is the net income for the year ended December 31, 2017?

Problem 9

San Pedro Appliance Company uses the installment method of accounting. Pertinent data from the companys records show the following:
2017 2018 2019
Installment P750,000 P937,500 P900,000
Sales
Cost of 562,500 712,500 630,000
Installment
Sales
Deferred
Gross Profit,
December 31:
2017 141,250 45,000
2018 150,000 30,000
2019 195,00

a. How much is the total collections during 2019?


b. What is the total balance of the Installment Accounts Receivable account as of December 31, 2019?

Problem 10

Pogi, Inc, sells computers on installments basis. For the year ended December 31, 2017, the following were reported:

Cost of Installment Sales P525,000


Loss on Repossessions 13,500
Fair value of reposed merchandise 112,500
Account defaulted 180,000
Deferred gross profit, December 31 108,000

How much was collected during the year?

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