1. The chief accountant of Sony Appliances Inc.

provided the following balances from its

unadjusted trial balance for the year ended December 31, 2023:

Account January 1, 2023 December 31, 2023

Instalment receivable – 2021 contract P2,000,000 P500,000
Instalment receivable – 2022 contract P3,000,000 P1,000,000
Instalment receivable – 2023 contract P5,000,000
Deferred gross profit – 2021 contract P800,000
Deferred gross profit – 2022 contract P1,800,000
New inventory P200,000 P300,000
Net purchases (excluding freight-in) P5,000,000
Freight in P100,000
Cash sales for year 2023 P2,000,000
Instalment sales for year 2023 P8,000,000

The following additional notes are provided for the year ended December 31, 2023:
 The gross profit rate for 2023 instalment sales is the average of previous years’ gross
profit rate for instalment sales.
 On July 1, 2023, Sony wrote off 2021 instalment receivable with account balance of
P300,000 because of the bankruptcy of the customer. Sony records its impairment loss of
instalment receivable using direct write off method.
 On October 1, 2023, a 2022 contract customer defaulted on the instalment due which
resulted to repossession of the inventory with fair value of P100,000. The defaulted
account has a balance of P600,000.
 On November 1, 2023, the repossessed inventory was sold at a cash price of P150,000
after reconditioning it at a cost of P20,000. The sale of repossessed inventory is not yet
reflected on the cash sales stated above.
 The total operating expenses, exclusive of impairment loss and loss on repossession, of
Sony for the year ended December 31, 2023 amount to P400,000.

1. What is the net income to be reported by Sony Inc. for the year ended December 31,
2023?
a. 2,840,000
b. 3,130,000
c. 3,520,000
d. 2,980,000

2. What is the total adjusted deferred gross profit as of December 31, 2023, respectively?
a. 3,200,000
b. 3,300,000
c. 3,100,000
d. 3,400,000