THQ002

MULTIPLE CHOICE ‐ SUMMARY NOTES & QUIZZER ON INSTALLMENT SALES
1 B ‐ Multiplying the total collected receivable by the gross profit rate based on sales
2 B ‐ P55,037
Installment sales‐2013             235,000 * Collections on principal‐2019                 54,000
Down payment              (78,333) Interest(235,000X2/3)X12%               (18,800)
Collections on principal                35,200
2019              (35,200) *
2020              (58,200) ** ** Collections on principal‐2020                77,000
Defaults Interest(235,000X2/3)X12%               (18,800)
2019                (3,580)                58,200
2020                (4,650)
Installment rec.‐2019 bal. in 2020               55,037
3 C ‐ 44% and 45%
4 A ‐ P147,500; P200,500
2019 sales 2020 sales
Sales: 27,000+235,000              262,000
           37,000+330,000            367,000
Less: COGS 
inv, beg              45,500
Purchases              193,000            215,000
COGAS             193,000            260,500
Inv., end               45,500              60,000
COGS             147,500            200,500 4. A
Gross profit             114,500            166,500
114.5/262 166.5/367
GPrate 44% 45% 3. C
5 B ‐ P111,378
2019 sales 2020 sales
Downpayment             110,000
Collections in 2020,
applying to principal                58,200               43,600
Total Collection               58,200             153,600
X GP rate 44% 45%
Gross profit on Installment sales               25,608               69,120                94,728
GP on cash sales‐2020                16,650
Total RGP for 2020              111,378
6 A ‐ P101,909
2019 sales 2020 sales
Installment rec.             235,000             330,000
Down payment               78,333             110,000
            156,667             220,000
Defaults 
2019                 3,580                 4,650
2020                 3,750
Collections on principal * Collections on principal‐2020        70,000
2019               35,200               58,200 Interest(330,000X2/3)X12%       (26,400)
2020               43,600 *        43,600
Installment rec. bal. in 2020               55,037             172,650
GP rate 44% 45%
24216.28               24,216               77,693
Deferred gross profit      101,909
A ‐ When the entity’s a performance does not create as asset with alternative use to the entity and the entity has an enforceable right to payment for performance 
7
completed to date.
8 C ‐ Debit to deferred gross profit
A ‐ The initial collections on the sale are treated as recovery of the inventory sold. Thus, no gross profit or interest income is recognized until total collections from 
9
the sale equals the cost of inventory sold.
10 D ‐ P600,000
Cash sales( equivalent to 100%) 90,000
 Installment sales(446,400/ 124%)          360,000
 Change sales (180,000/ 120%) 150,000
Total sales for 2019 600,000
11 B ‐ P234,000
12 D ‐ P390,000
Cost of goods sold Total COGS 390,000
Merchandise Inv. 12/31/18 52,500 X 360/600
Purchases 390,000 Cost of installment sales 234,000 11. B
Freight in 3,000
Repossessed merchandise            15,000
COGAS 460,500
  Less: merchandise inv. 12/31/19 (New and repossessed) 70,500
COGS 390,000 12. D
13 C ‐ P469,400
Cash collection:
Cash sale  90,000
Charge sale 105,000 195,000
Installment sales
2017
Inst. Receivable, Beg. (22,200/ 30% ) 74,000
Inst. Receivable, End              (15,000)
Inst. Receivable‐ 2017, Repo              (18,000) 41,000
2018
Inst. Receivable, Beg. (39,360/ 32% ) 123,000
Inst. Receivable, End              (45,000)
Inst. Receivable‐ 2017, Repo              (21,000) 57,000
2019
Inst. Receivable, Beg. 446,400
Inst. Receivable, End           (270,000) 176,400
Total cash collection            469,400
14 B ‐ P157,156
2022 sales 2023 sales 2024 sales
Installment sales 400,000 440,000 420,000
COS 240,000 272,800 256,200
GP 160,000 167,200 163,800
GPRate 40% 38% 39%

RGP in 2024
Installments A/R  1/1/24 110,000 250,000 420,000
Less : Installments A/R 12/31/24 28,000 92,000 238,000
Dec. in installment A/R 82,000 158,000 182,000
Less: defaults 5,000
Write offs 9,000 2,800
Collection in 2014 68,000 155,200 182,000
X GP rate* 40% 38% 39%
total RGP for 2014 27,200 58,976 70,980              157,156
15 A ‐ P3,870
FV of Repossessed Merchandise:
Estimated selling price: 7,000 =7,000 X  39%**=2,730
Reconditioning cost                   (400) **GP rate in year of repossession
Normal profit on resale                (2,730) *
FV of Repossessed Merchandise                 3,870
16 D ‐ P870
FV of Repossessed Merchandise 3,870
less: Unrecovered Cost
Ins. Rec‐ 2022 5,000
Def. gross profit (40%)                (2,000)                (3,000)
Gain of repossession                     870
17 Bonus ‐ P138,980
2022 sales 2023 sales 2024 sales
Installments A/R 12/31/24 28,000 92,000 238,000
X GP rate* 40% 38% 39%
Deferred Gross Profit 11,200 34,960 92,820              138,980
18 D ‐ P58,690
Total realized GP 157,156
Operating expenses  104,000
Error correction*                 (4,664)              (99,336)
Operating income 57,820
Other income: 
Gain on repossession  870
Net Income‐2014                58,690

Correct entry: Adjusting entry:
DGP (9000*40%+2800*38%) 4,664 DGP (9000*40%+2800*38%) 4,664
Operating expenses 7,136                  Operating expenses 4,664
               Installment A/R‐ 2022 9,000
               Installment A/R‐ 2023 2,800