1. Under IAS 18, what is the measurement of sales revenue from instalment sales?

a. Book value of the consideration received or receivable.

b. Fair value of the consideration received or receivable.
c. Cost of the consideration received or receivable.
d. Carrying amount of the consideration received or receivable.

2. Under IAS 18, if the company receives long-term non-interest bearing note receivable as
consideration for the sale of its inventories on an instalment basis, what is the measurement of
sales revenue from instalment sales?
a. Face value of the note receivable
b. Maturity value of note receivable
c. Present value of note receivable
d. Undiscounted value of note receivable

3. How shall the difference between the fair value and nominal amount of the long-term note
received as consideration in an instalment sales be accounted for?
a. It shall be recognized as expense on the date of sale.
b. It shall be recognized as gain on exchange on the date of sale.
c. It shall be recognized as interest revenue over the term of the note using effective interest
method.
d. It shall be recognized as interest revenue over the term of the note using straight line
method.

4. In an instalment sales, if the collection of the note receivable is not remote and not reasonably,
how shall the gross profit be recognized?
a. It shall be fully recognized on the date of sale using accrual basis.
b. It shall be recognized in proportion to the amount of collection under instalment method.
c. It shall not be recognized.
d. It shall be recognized fully only on the year the receivable is completely collected.

5. Under generally accepted accounting principles, what is the proper presentation of deferred
gross profit from instalment sales?
a. It shall be presented as current liability.
b. It shall be presented as equity.
c. It shall be presented as deferred revenue.
d. It shall be presented as contra-instalment receivable account.

6. If the fair value of the repossessed inventory cannot be estimated reliably at the date of
repossession, what shall be the basis of initial measurement of repossessed inventory?
a. Estimated selling price less reconditioning cost less cost to sell.
b. Estimated selling price less reconditioning cost.
c. Estimated selling price less cost to sell.
d. Estimated selling price less reconditioning cost less cost to sell less normal profit.

7. If the initial measurement of repossessed inventory is lower than the net of defaulted instalment
receivable and its corresponding deferred gross profit , the difference shall be recognized as
a. Loss on repossession to be presented as part of income from continuing operation before
tax.
b. Deferred loss on repossession to be presented as current asset.
c. Gain on repossession to be presented as part of other comprehensive income.
d. Deferred gain on repossession to be presented as current liability.
Part II: Problem Solving

1. The ABC Company recognizes profit on credit sales on installment basis. At the end of 2021,
before the accounts are adjusted, the ledger shows the following:
Installment Accounts receivable 2020 337,500
Installment Accounts receivable 2021 525,000
Deferred gross profit 2020 185,000
Deferred gross profit 2021 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 2021, the
gross profit on installment sales was 4% higher than 2020.
How much is the total realized gross profit in 2021?
a. 229,500
b. 769,500
c. 181,000
d. 721,000