AFAR CONSIGNMENT INSTALLMENT PDF

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Goods on consignment should be included in the inventory of a. the consignor but not the consignee. b. both the consignor and the consignee. c. the consignee but not the consignor. d. neither the consignor nor the consignee. Revenue is recognized by the consignor when the a. goods are shipped to the...

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1. Goods on consignment should be included in the inventory of a. the consignor but not the consignee. b. both the consignor and the consignee.

c. the consignee but not the consignor. d. neither the consignor nor the consignee.

2. Revenue is recognized by the consignor when the a. goods are shipped to the consignee. b. consignee receives the goods.

c. consignor receives an advance from the consignee. d. consignor receives an account sales from the consignee.

3. In accounting for sales on consignment, sales revenue and the related cost of goods sold should be recognized by the a. Consignor when the goods are shipped to the consignee. b. Consignee when the goods are shipped to the third party. c. Consignor when notification is received that the consignee has sold the goods. d. Consignee when cash is received from the customer. 4. When goods are consigned out, profits should be recognized by the consignor when the a. Goods are sold by the consignee. c. Consignee agrees to the terms of the consignment. b. Goods are received by the consignee. d. Goods are shipped by the consignor. 5. Jel Co., a consignee, paid the freight costs for goods shipped from Dale Co., a consignor. These freight costs are to be deducted from Jel’s payment to Dale when the consignment goods are sold. Until Jel sells the goods, the freight costs should be included in Jel’s a. Cost of goods sold. b. Freight-out costs. c. Selling expenses. d. Accounts receivable. 6. Deb Co. records all sales using the installment method of accounting. Installment sales contracts call for 36 equal monthly cash payments. The amount of deferred gross profit relating to collections 12 months beyond the balance sheet date should be reported in the a. Current liability section as a deferred revenue. c. Current asset section as a contra account. b. Noncurrent liability section as a deferred revenue. d. Noncurrent asset section as a contra account. 7. The Deferred Gross Profit account is a a. Liability account. b. Contra asset account.

c. Contra liability account.

d. Either a or b.

8. Deferred gross profit on installment sales is generally treated as a(n) a. deduction from installment accounts receivable. c. unearned revenue and classified as a current liability. b. deduction from installment sales. d. deduction from gross profit on sales. 9. The cost recovery method a. is used only when circumstances surrounding a sale are so uncertain that earlier recognition is impossible. b. is the most common method of accounting for real estate sales. c. is similar to percentage-of-completion accounting. d. is never acceptable under generally accepted accounting principles. 10. Wren Co. sells equipment on installment contracts. Which of the following statements best justifies Wren’s use of the cost recovery method of revenue recognition to account for these installment sales? a. The sales contract provides that title to the equipment only passes to the purchaser when all payments have been made. b. No cash payments are due until one year from the date of sale. c. Sales are subject to a high rate of return. d. There is no reasonable basis for estimating collectability. 11. FGH Machinery, Inc. is engaged in the business of selling tractors on installment basis. Under which of the following circumstances should you recommend to FGH the use of the cost recovery method of revenue recognition to account for the installment sales? a. Where there is no reasonable basis for estimating collectability. b. Where the sales are subject to a high rate of return. c. Where no cash payments are due until one year from date of sale. d. Where the sale contract provides that title to the equipment only passes to the buyer when all payments have been made. 12. According to the cost recovery method of accounting, the gross profit on an installment sale is recognized in income: c. on the date the final cash collection is received. a. after cash collections equal to the cost of sales are received. b. in proportion to cash collections. d. on the date of sale. 13. ABC Oil Co. is engaged in extensive exploration for oil in the Cagayan Valley. If upon discovery of oil the company does not recognize any revenue from oil sales until the sales exceed the costs of exploration, the basis of revenue recognition being employed is the a. production basis. c. sales (or accrual) basis. b. cash (or collection) basis. d. sunk cost (or cost recovery) basis. 14. A sells on the installment basis, with service contracts paid in full at the date of sale. The collections from service contracts should be recorded as an increase in a. Deferred revenue account. c. Valuation account of stockholders’ equity. b. Sales receivable valuation account. d. Service revenue account. 15. Winser, Inc. is engaged in extensive exploration for water in Utah. If, upon discovery of water, Winser does not recognize any

revenue from water sales until the sales ex ceed the costs of exploration, the basis of revenue recognition being employed is the a. production basis. b. cash (or collection) basis.

c. sales (or accrual) basis.

d. cost recovery basis.

I. The XYZ Co. recognizes profit on credit sales on installment basis. At the end of 2016, before the accounts are adjusted, the ledger shows the following: Installment Accounts Receivable 2015 337,500 Installment Accounts Receivable 2016 525,000 Deferred Gross Profit 2015 185,000 Deferred Gross Profit 2016 272,500 Regular Sales 1,500,000 Cost of Regular Sales 960,000 Each year the gross profit on installment sales was 8% lower than the regular sales. In 2016, the gross profit on installment sales was 4% higher than 2015. 1. How much is the total realized gross profit in 2016? II. The following data pertain to installment sales of ABC. Installment sales, 2016 P 545,000, 2017 P 785,000, and 2018 P 968,000. Mark up on cost 35%. Down payment 20%. Collections after down payment are 40% during the year of sale, 35% during the year after and 25% on the third year. 2. How much is the realized gross profit for 2016? 3. How much is the deferred gross profit for the installment sales made during 2017? 4. How much is the installment accounts receivable on December 31, 2018? III. The company makes all sales on installment contracts and accordingly reports income on the installment basis. Installment contracts receivables are accounted by years. Defaulted contracts are recorded by debiting loss on repossession account and crediting the appropriate installment contract receivable account for the unpaid balance at the time of default. All repossessions and trade-ins are recorded at realizable values. The following data relate to the transactions during 2016 and 2017: 2016 2017 Installment sales 1,500,000 1,985,000 Installment contract receivable (12/31) 2016 sales 800,000 250,000 2017 sales 950,000 Purchases 1,000,000 1,200,000 New merchandise inventory (12/31) 100,000 260,000 Loss on repossession 60,000 The company auditor disclosed that the inventory taken on December 31, 2017 did not include certain merchandise received as trade-in on December 2, 2017 for which an allowance was given. The realizable value of the trade-in merchandise was P 15,000 more than its allowance. No entry was made to record this merchandise on the books at the time it was received. In 2017, a 2016 contract was defaulted and the merchandise was repossessed. At the time of default, the repossessed merchandise had an appraised value of P 25,000. The repossessed merchandise was neither recorded nor included in the physical inventory on December 31, 2017. 5. What is the realized gross profit in 2017? 6. What is the correct loss on repossession in 2017? 7. What is the net income in 2017? IV. Philcor, Inc. consigned twelve refrigerators to Ocampo’s Emporium. The refrigerators cost P 6,000 each and the consignor paid P720 for freight out. The consignee subsequently rendered an account sales for five units sold at P 7,700 each, and deducted the following items from the selling price: Commission (based on sales net of commission) 10% Marketing expense (based on commission) 10% Delivery and installation (on each unit sold) P30 8. How much was the net profit of the consignor on the five refrigerators sold? 9. How much was the net remittance of the consignee on the five refrigerators sold? 4200 – 34500 V. Stainless Works Mfg. Co., consigned 5 dozens of stainless chairs to Urban Furniture Co. on April 1, 2017. Each chair cost P120 and the consignor paid P600 for the shipment to the consignee. On August 15, 2017, 36 chairs were already sold and the consignee rendered an account sales, and remitted the balance due the consignor in the amount of P 5,580 after deducting the following: Commission at 15% of the selling price Selling expenses P 360 Delivery and installation 180 10. How much is the profit on consignment? 11. The cost of the inventory on consignment in the hands of Urban Furniture Co. is? 900 – 3120 VI. CK Manufacturing Co. consigned to CE Trading Corp. twelve Sony colored TV sets which cost P 9,000 each. Freight out was paid by the consignor in the amount of P600. CE Trading sold eight sets, rendered an account sales, and remitted the amount of P 82,600 after deducting the following from the selling price of the sets sold: Commission on selling price 12% Selling expenses P 1,200 Cost of antennae given free 1,400 Delivery and installation 2,800 12. The total selling price of the eight sets sold by CE Trading Corp. is?...