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    Installment Sales - Exercises 1

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    Sova OmenPhoenix
    The document contains 6 exercises involving entries for installment sales with deferred gross profit. Exercise 1 requires entries for 2018 installment sales including recognition of gross profit. Exercise 2 requires entries for repossession of merchandise when a customer defaults on payments. Exercise 3 requires determining gross profit realized in 2018 for installment sales from prior years.

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    © All Rights Reserved
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    Installment Sales - Exercises 1

    Uploaded by

    Sova OmenPhoenix
    246 views3 pages
    The document contains 6 exercises involving entries for installment sales with deferred gross profit. Exercise 1 requires entries for 2018 installment sales including recognition of gross profit. Exercise 2 requires entries for repossession of merchandise when a customer defaults on payments. Exercise 3 requires determining gross profit realized in 2018 for installment sales from prior years.

    Original Title

    Installment-Sales_Exercises-1

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    The document contains 6 exercises involving entries for installment sales with deferred gross profit. Exercise 1 requires entries for 2018 installment sales including recognition of gross profit. Exercise 2 requires entries for repossession of merchandise when a customer defaults on payments. Exercise 3 requires determining gross profit realized in 2018 for installment sales from prior years.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    246 views3 pages

    Installment Sales - Exercises 1

    Uploaded by

    Sova OmenPhoenix
    The document contains 6 exercises involving entries for installment sales with deferred gross profit. Exercise 1 requires entries for 2018 installment sales including recognition of gross profit. Exercise 2 requires entries for repossession of merchandise when a customer defaults on payments. Exercise 3 requires determining gross profit realized in 2018 for installment sales from prior years.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 3

    Installment Sales

    Exercises
    C. N. Dait

    1. Benson Appliance Corporation reports income on installment basis and uses perpetual inventory
    system. The following data are available:

    Sales made during Gross Profit rate Installment Collections Installment


    Contract during 2018 Contract
    Receivable Receivable
    January 1, 2018 December 31, 2018
    2016 46% P30,000 P30,000 -
    2017 42% 50,000 34,000 P16,000
    2018 40% - 60,000 140,000

    Required:

    Prepare entries for the year 2018, including the recognition of gross profit at the end of 2018.

    2. A sale on installment basis was made in 2017 for P16,000 at a gross profit of P5,600. At the end of
    2018, when the installment account receivable had a balance of P7,000, it was ascertained that the
    customer would not be able to make further payments. The merchandise was then repossessed. It was
    estimated that the repossession can be resold for P6,000 after reconditioning the same at P1,500 and a
    commission of 10%.

    Required:

    Prepare entries on the repossession.

    3. The following data relate to Beta Company:

    Jan. 1, 2018 Dec. 31, 2018


    Installment Contract Receivable -2017 P200,000 P40,000
    Installment Contract Receivable -2016 400,000 100,000
    Deferred Gross Profit 144,000 144,000

    An analysis of he Deferred Gross Profit account balance as of January 1, 2018 discloses that it consists of
    P44,000 and P100,000 for 2017 and 2016 accounts, respectively.

    Instructions:

    Determine the gross profit realized in 2018 on the installment sales of 2017 and 2016.
    Installment Sales
    Exercises
    C. N. Dait

    4. The Video Store accounts for installment sales on the installment basis. At the beginning of 2018, ledger
    accounts include the following balances:

    Installment Contract Receivable, 2016 P150,000


    Installment Contract Receivable, 2017 480,000
    Deferred Gross Profit, 2016 63,000
    Deferred Gross Profit, 2017 180,000

    At the end of 2018, account balances before adjustment for realized gross profit on installment sales are:

    Installment Contract Receivable, 2016 None


    Installment Contract Receivable, 2017 120,000
    Installment Contract Receivable, 2018 650,000
    Deferred Gross Profit, 2016 63,000
    Deferred Gross Profit, 2017 180,000
    Deferred Gross Profit, 2018 300,000

    Installment sales in 2018 were made at 66 2/3% above cost of merchandise sold.

    Instruction:

    Prepare the entries necessary to record the gross profit realized in 2018.

    5) Complete the following table

    2016 2017 2018


    Installment Sales P50,000 P80,000 (7)
    Cost of Installment sales (1) (5) 91,800
    Gross Profit (2) (6) 28,200
    Gross profit percentage (3) 25% (8)
    Cash collections
    2016 (4) 25,000 10,000
    2017 20,000 50,000
    2018 45,000
    Realized Gross profit on P1,100 10,500 (9)
    Installment sales
    Installment Sales
    Exercises
    C. N. Dait

    6. Computronics accounts for installment sales by reporting income in proportion of collections to selling
    price. On December 31, 2018, the books show account balances as follows:

    Installment Contract Receivable Deferred Gross Profit


    2016 P10,000 2016 P 8,000
    2017 40,000 2017 26,000
    2018 90,000 2018 105,000

    The gross profit rates were 2016, 35%; 2017, 30%; 2018, 40%.

    Instructions:

    1. Prepare the required adjusting entries on December 31, 2018.


    2. Determine the cash collections in 2018 on accounts receivable of each year.

    END

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