INSTALLMENT SALES

1. The ABC Company 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.

How much is the total realized gross profit in 2016?

A. 229,500
B. 769,500
C. 181,000
D. 721,000
2. The Sassy Company is a dealer of air conditioners. For the period May 1, 2016, Sassy Company
gives a trade discount of 10% to all its buyers. On May 1, 2016, five units of air conditioners with
a total list price of P100.000 and total cost of P59,800 were sold to Mr. Rusty.

Sassy Company granted an allowance of P10,000 for Mr. Rusty used air conditioner as trade-in,
the current market value of the equipment is P12,000. The balance was payable as follows: 20%
of the current paid at the time of purchase; the rest payable in 10 months starting June 1,2016

After six months of paying, Mr. Rusty defaulted in the payment of December 1, 2016. The five
units of air conditioners were repossessed and it would require P2,000 reconditioning cost for
each air conditioners before it could be resold for P6,000 each. A 15% gross profit rate was usual
from the sale of used equipment.

Operating Expenses amounted to P5,380.

1. How much is the total realized gross profit on installment sales for 2016?
A. 23,240
B. 23,420
C. 19,040
D. 19,400
2. How much is the net income for 2016?
A. 17,860
B. 16,720
 C. 17,680
D. 16,270

3. The following data pertain to installment sales of ABC

 Installment sales, 2016 P545,000. 2017 P785,000, and 2018 P968,000. 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.

1. How much is the realized gross profit for 2016?

A. 109,387
B. 73,474
C. 148,112
D. 114,063
2. How much is the deferred gross profit for the installment sales made during 2017?
A. 97,689
B. 131,880
C. 141,112
D. 114,063
3. How much is the installment accounts receivable on December 31, 2018?
A. 652,722
B. 621,640
C. 602,991
D. 685,368
4. 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 P15,000 more than its
allowance.
No entry was made to record this merchandise on the book 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 P25,000.000. The repossessed
merchandise
was either recorded nor included in the physical inventory on December 31, 2017.

1. What the realized gross profit in 2017?

A. 724,000
B. 700,000
C. 504,000
D. 685,200
2. What is The correct loss on repossession in 2017?
A. 35,000
B. 15,000
C. 11,000
D. 20,000
3. What is the net income in 2017?
A. 689,000
B. 665,000
C. 685,000
D. 680,000