Problem IV

The Karol Company accounts for its sales on the installment sales basis. At the beginning of
2020, ledger accounts include the following account balances:
Installment Accounts Receivable, 2018 P 90,000.00
Installment Accounts Receivable, 2019 288,000.00
Deferred Gross Profit, 2018 37,800.00
Deferred Gross Profit, 2019 108,000.00

At the end of 2020 account balances before adjustment for realized gross profit on
installment sales are:
Installment Accounts Receivable, 2018 p 0
Installment Accounts Receivable, 2019 72,000.00
Installment Accounts Receivable, 2020 390,000.00
Deferred Gross Profit, 2018 37,800.00
Deferred Gross Profit, 2019 103,050.00
Deferred Gross Profit, 2020 180,000.00

Installment sales in 2020are made at 25% above the cost of merchandise sold; cash sales
amounting to P700,000 were made at a markup of 30% of sales and credit sales of
P200,000 at a markup of 32%. During 2020 upon default in payment by the customer, the
company repossessed the merchandise with an estimated market value of P6,000. The
sales was made in 2019 for P32,400 and P19,200 had been collected prior to repossession.

Determine the:
1. Total realized gross profit before gain or loss on repossession in 2020:

a. P489,850
b. P215., 850
c. P113,850
d. P102.000

2. Realized gross profit on installment sales in 2020.

a. P489,850
b. P215,850
c. P113,850
d. P102,000
3. Realized gross profit on installment sales in 2020 for 2018 sales.

a. P489,850
b. P102,000
c. P 76,050
d. P37,800

4. Realized gross profit on installment sales in 2020 for 2019 sales.

a. P489,850
b. P102,000
c. P 76,050
d. P37,800

5. Realized gross profit on installment sales in 2020 for 2020 sales.

a. P489,850
b. P215,850
c. P113,850
d. P102,000

6. (Subsequent Sale of Repossessed Merchandise) - Assuming that Karol Company wants

to improve the salability of the repossessed merchandise, the company incurred
P500 for reconditioning. After which the company was able to sell the merchandise
to another customer for P8,125 at a down payment of 40%. Compute the realized
gross profit on the subsequent installment sale:

a. P850
b. P812
c. P650
d. P520