INSTALLMENT SALES:

HANDOUT / MOCK QUIZ

NAME: DAENIELLE AUDREY M. ESPINOZA COURSE & YEAR: BSA - 3 SCORE: ________________

PART 1 – THEORIES 29 Estimated Resale Value X

1 Cost Recovery Less (NCR): Normal Gross Profit (X)
2 Profit Recovery Cost to Sell (Ex: Commission) (X)
Reconditioning Cost (X)
3 Installment Method
Estimated Fair / Actual / Appraised/ Wholesale X
4 Installment Method Value of the Trade In
5 PAS 11 Less: Trade in Allowance (X)
Over/Under Allowance X
6 PAS 18
30 We have to compute for the adjusted sales price in trade-ins
7 PFRS 15 to use the result for the new ratio.
8 Sales 31 Sales
Installment Account Receivables xx Installment Account Receivables xx
Installment Sales xx Trade in (@FV) xx
9 Cost *Over Allowance xx
Cost of Installment Sales xx Installment Sales xx
Merchandise Inventory xx *Under Allowance xx
10 Payment 32 Cost
Cash xx Cost of Installment Sales xx
Installment Account Receivables xx Merchandise Inventory xx
11 Yearend 33 Yearend
Installment Sales xx Installment Sales xx
Cost of Installment Sales xx *Under Allowance xx
Deferred Gross Profit xx Cost of Installment Sales xx
12 Adjusting Journal Entry Deferred Gross Profit xx
Deferred Gross Profit xx *Over Allowance xx
Realized Gross Profit xx 34 IAR Beginning Balance
13 Financial Accounting way; Sales – Cost = Gross Profit, then Original Selling Price X
find the Cost ratio Trade In Allowance (X)
𝐷𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔 Down Payment (X)
14
𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑚𝑒𝑛𝑡 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑏𝑒𝑔𝑖𝑛𝑛𝑖𝑛𝑔
Beginning IAR X
𝐷𝑒𝑓𝑒𝑟𝑟𝑒𝑑 𝐺𝑟𝑜𝑠𝑠 𝑃𝑟𝑜𝑓𝑖𝑡 𝑒𝑛𝑑𝑖𝑛𝑔
15 35 Total Collections x Gross Profit Rate = RGP
𝐼𝑛𝑠𝑡𝑎𝑙𝑙𝑚𝑒𝑛𝑡 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑒𝑛𝑑𝑖𝑛𝑔

16 Because in trial balance, there is a chance that the other

account is already adjusted while the other account is not.
17 It is measured at fair value. PART 2 – COMPUTATION
18 Because the normal gross profit is not yet earned thus it is
considered unrealized. 1 2016 = 60% , 2017 = 62% , 2018 = 67%
19 As for commissions, these should be deducted because these 2 P 228,000
are the payments to the people who will help you sell the 3 P 155,000
repossessed merchandise. P 489,752
4
20 As for reconditioning cost, it should also be deducted because 5 P 66, 000
these are the expenses that is used to recondition the
merchandise due to the fact that it cannot be sold if it’s not 6 P 40,500
being reconditioned. 7 P 45,000
21 Fair value 8 P 140,000
22 Actual value 9 0
23 Appraised value 10 P 366,000
24 Repossessed Merchandise (@FV) xx 11 P 5, 200 under allowance
Loss on repossession xx 12 P 243, 200
Deferred gross profit xx
13 P 130, 123
Installment Account Receivables xx
Losses on Repossessions are not shown in the financial 14 P 350,000
25
statements as a separate line item – it decreases the Realized 15 P 125,000
Gross Profit from Installment Sales. 16 P 225,000
26 Gains on Repossessions are not recorded. It will only be 17
recognized once the recovered item has been subsequently
sold/realized,
18
27 Bad Debts xx 19
Deferred gross profit xx
Installment Account Receivables xx
28 Estimated Resale Value X
Less (NCR): Normal Gross Profit (X)
Cost to Sell (Ex: Commission) (X)
Reconditioning Cost (X)
Estimated Fair / Actual / Appraised/ X
Wholesale Value
Less: Unrecovered Cost (X)
Loss on Repossession X