QA Installment Sales PDF

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Trekker Company reports gross profit on the installment basis. The f ollowing data are available REQUIRED: COMPUTE THE REALIZED GROSS PROFIT BEFORE LOSS ON REPOSSESSIONFOR 2020 AND THE LOSS ON REPOSSESSION FOR 2020. On November 1, 2020, Speed Motor which maintains a perpetual inventory record sold a...

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1. Trekker Company reports gross profit on the installment basis. The following data are available

REQUIRED: COMPUTE THE REALIZED GROSS PROFIT BEFORE LOSS ON REPOSSESSION FOR 2020 AND THE LOSS ON REPOSSESSION FOR 2020.

2. On Nov ember 1, 2020, Speed Motor which maintains a perpetual inventory record sold a new automobile to Rapids for P6,800,000. The cost of the car to the seller was P5,205,000. The buyer paid 30% down and received P640,000 allowance on an old car traded, the balance being payable in equal monthly installment payments commencing the month of sale. The monthly amortization was P240,000 inclusive of 12% interest on the unpaid amount of the obligation. The car traded-in has a wholesale value of P960,000 after expending reconditioning cost of P180,000. After paying three installments, the buyer defaulted and the car was subsequently repossessed. When reacquired, the car was appraised to have a fair value of P2,400,000. How much is the realized gross profit on installment sales during 2020?

3. Jing Trading Company, which started operations on January 2, 2012, sells video equipment on installment terms. Whenever a contract is in default, Jing responses the merchandise and writes this off to a Loss on Defaulted Contracts account. Information regarding the repossessed goods are not recorded in the books but are kept on a memo basis. Proceeds from sale of these goods are credited to the Loss on defaulted Contracts account. The following information are taken from the books of Jing:

Installment Contracts Receivable, 2012 Installment Contracts Receivable, 2013 Sales Loss on defaulted Contracts Allowance for Defaulted Contracts

December. 31 2013 2012 P2, 000 P31, 500 40, 000 125, 000 75, 000 4, 275 250 2, 250 2, 250

Additional information: a) No repossessed video equipment was sold in 2012 or 2013 for more than the unpaid balance of the original contract. A further analysis of the Loss on Defaulted Contracts account showed the following breakdown:

Contracts written off Less: Sales of repossession goods Loss on Defaulted Contracts

2012 Contracts P3, 750 800 P2, 950

2013 Contracts P1, 500 175 P1,325

The repossessed goods on hand on December 31, 2013, all of which were repossessed from 2012 contracts, are valued at P200. b) The P2, 000 balance of the Installment Contracts Receivable 2012 account is current due and collectible. c) The gross profit rates on installment sales were 40% in 2012 and 42% in 2013. d) The rate of bad debts loss for 2013 is estimated to be the same as the 2012 experiences rate based on sales: The required balance of the allowance for Defaulted Contracts account and the realized gross profit on December 31, 2013 from 2012 sales are:

4. The following data were taken from the records of Camille Appliance Company before its accounts were closed for the year 2013. The company sells exclusively on the instalment basis and it uses the installment method for recognizing profit: Installment sales Cost of installment sales Operating expenses Balances as of December 31: Inst. Contracts Receivable- 2011 Inst. Contracts Receivable- 2012

2009 P400, 000 240, 000 100, 000

2010 P440, 000 272, 800 94, 000

2011 P420, 000 256, 200 96, 000

220, 000

110, 000 250, 000

28, 000 92, 000

Inst. Contracts Receivable- 2013

238, 000

During 2013, because some customers can no longer be located, the company wrote off P9, 000 of the 2011 installment accounts and P2, 800 of the 2012 installment accounts as uncollectible. Also during 2013, a customer defaulted and the company repossessed merchandise appraised at P2, 400 after costs of reconditioning estimated at P400. The merchandise had been purchased in 2011 by a customer who still owed P5, 000 at the date of the repossession. The total comprehensive income on December 31, 2013 is:

5. United Trading accounts for sales under the installment method. On January 1, 2013 its ledger accounts included the following balances: Installment Receivable, 2011 Installment Receivable, 2012 Deferred Gross Profit, 2011 Deferred Gross Profit, 2012

P38, 500 155, 000 11, 550 62, 000

Installment sales in 2013 were made at a 42% gross profit rate. December 31, 2013 accounts balances before adjustment were as follows:

Installment Receivable, 2011 Installment Receivable, 2012 Installment Receivable, 2012 Deferred Gross Profit, 2011 Deferred Gross Profit, 2012 Deferred Gross Profit, 2013

P0 42, 000 100, 500 11, 550 62, 000 75, 810

The total realized gross profit on December 31. 2013 is:...