RECAP –

CONSIGNMENT
SALES
 Revenue Recognition

INSTALLMENT SALES
is income that arises during ordinary
Revenue activities of an entity and is referred to by a
variety of different names including sales,
fees, interest, dividends and royalties.
Income

other items that meet the definition of

Gains income and may or may not arise during the
ordinary activities of an entity.
 Under PAS 18, a company
should recognize revenue
from the sale of goods when
all of the following
conditions have been
satisfied:

The significant risk and

rewards of ownership of the Both the amount of revenue It is probable that the
goods have been
and the costs associated economic benefits of the
transferred to the buyer and with the transaction can be sale will flow to the selling
the selling company retains
no effective control over reliably measured company.
what happens to the goods
 Regular Sales
Types of
Sales
Installment Sales

Time of Sales Time of Collection

Cost recovery Installment Method

Profit recovery Cash Method

Regular Sales Installment Sales
Account Receivables xx Installment Account Receivable xx
Sales xx Sales xx

COGS xx COGS xx
Inventory xx Inventory xx

Sales xx
COGS xx
Deferred Gross Profit (DGP) xx

Cash xx Cash xx
Account Receivable xx Installment Account Receivable xx

DGP xx
Realized Gross Profit (RGP) xx
 Sales – COGS = GP
GP/Sales = GPR
Gross Profit
Rate
DGP/IAR = GPR
 The trial balance was prepared for WW Equipment, Inc., on December 2022 to reflect
the transactions transpired in 2022:
1. Calculate the gross profit percentage on IS
Debit Credit
for 2020, 2021, 2022 Cash 27,500.00
2020= 9,600/30,000 = 32% Installment Account Receivable, 2022 55,000.00
Installment Account Receivable, 2021 12,000.00
2021= 30% Installment Account Receivable, 2020 3,000.00
2022= 27.50% Account Receivable 17,000.00
Inventory, December 31 2021 52,000.00
2. Prepare a balance sheet and income statement Other Assets 40,000.00
Accounts Payable 40,000.00
AR DGP, 2021 45,000.00
30K DGP, 2020 9,600.00
Capital Stock 100,000.00
27K Retained Earnings 68,400.00
Sales 125,000.00
Installment Sales 320,000.00
Purchases 350,000.00
3K Cost of Installment Sales 232,000.00
Shipment on Installment Sales 232,000.00

2020 = 27K x 32% = 8,640 Operating Expenses 151,500.00

Totals 940,000.00 940,000.00
2021 = 138K x 30% = 41,400 The inventory of merchandise on December 2022 was 60,000. The following
2022 = 265K x 27.5% = 72,875 account balances were reported in the post-closing trial balance prepared on
DGP, 22 72,875 January 1, 2022.
IAR, 2021 150,000
DGP, 21 41,400 IAR, 2020 30,000
DGP, 20 8,640 DGP, 2021 45,000
RGP 122,915 DGP, 2020 9,600
 The trial balance was prepared for WW Equipment, Inc., on December 2022 to reflect
the transactions transpired in 2022:
2. Prepare a balance sheet and income statement
Debit Credit
IS RS Total Cash 27,500.00
Installment Account Receivable, 2022 55,000.00
Sales 320,000.00 125,000.00 445,000.00 Installment Account Receivable, 2021 12,000.00
COGS Installment Account Receivable, 2020 3,000.00
Beg. Inventory 52,000.00
Account Receivable 17,000.00
Purchases 350,000.00 Inventory, December 31 2021 52,000.00
Other Assets 40,000.00
Inv. Avaiable for Sale 402,000.00 Accounts Payable 40,000.00
DGP, 2021 45,000.00
Less: Ending Inv (60,000.00) 232,000.00 110,000.00 342,000.00 DGP, 2020 9,600.00
GP 88,000.00 15,000.00 103,000.00 Capital Stock 100,000.00
Retained Earnings 68,400.00
Less: DGP 15,125.00 15,125.00 Sales 125,000.00
Installment Sales 320,000.00
RGP 72,875.00 15,000.00 87,875.00 Purchases 350,000.00
RGP on Prior Years 50,040.00 Cost of Installment Sales 232,000.00
137,915.00 Shipment on Installment Sales 232,000.00
Opex 151,500.00 Operating Expenses 151,500.00
NI/NL (13,585.00)
Totals 940,000.00 940,000.00
The inventory of merchandise on December 2022 was 60,000. The following
IS 320K Income Summary account balances were reported in the post-closing trial balance prepared on
COGS 232K Shipment on IS January 1, 2022.
Inv IAR, 2021 150,000
DGP 88K
Purchases IAR, 2020 30,000
DGP, 2021 45,000
DGP, 2020 9,600
 The trial balance was prepared for WW Equipment, Inc., on December 2022 to reflect
2. Prepare a balance sheet and income statement the transactions transpired in 2022:
Debit Credit
Debit Credit Cash 27,500.00
Cash 27,500.00 Installment Account Receivable, 2022 55,000.00
Installment Account Receivable, 2021 12,000.00
Installment Account Receivable, Installment Account Receivable, 2020 3,000.00
2022 55,000.00 Account Receivable 17,000.00
Inventory, December 31 2021 52,000.00
Installment Account Receivable, Other Assets 40,000.00
2021 12,000.00 Accounts Payable 40,000.00
DGP, 2021 45,000.00
Installment Account Receivable,
2020 3,000.00 DGP, 2020 9,600.00
Capital Stock 100,000.00
Account Receivable 17,000.00 Retained Earnings 68,400.00
Inventory, December 31 2022 60,000.00 Sales 125,000.00
Installment Sales 320,000.00
Other Assets 40,000.00
Purchases 350,000.00
Accounts Payable 40,000.00 Cost of Installment Sales 232,000.00
DGP, 2022 15,125.00 Shipment on Installment Sales 232,000.00
Operating Expenses 151,500.00
DGP, 2021 3,600.00 Totals 940,000.00 940,000.00
DGP, 2020 960.00 The inventory of merchandise on December 2022 was 60,000. The following
Capital Stock 100,000.00 account balances were reported in the post-closing trial balance prepared on
Retained Earnings 54,815.00 January 1, 2022.
IAR, 2021 150,000
IAR, 2020 30,000
DGP, 2021 45,000
DGP, 2020 9,600
 Repossessions Repair / Reconditioning

Cost to sell
Normal profit

Date of sale Date of Repossession Date of Resale

Accounting for repossessions is the determination of the fair market value at the date of repossession.

Entry: Repossession Inventory xx

DGP xx
Loss xx
IAR xx
 The trial balance was prepared for WW Equipment, Inc., on December 2022 to reflect
At the end of December, before preparing the trial the transactions transpired in 2022:
balance, the bookkeeper made the following Debit Credit

incomplete entry: Cash 25,000.00

Installment Account Receivable, 2022 80,000.00
Repossessed Merchandise, 2021 10K Installment Account Receivable, 2021 20,000.00

Loss on Repossessions 13K Installment Account Receivable, 2020 5,000.00

Account Receivable 40,000.00
IAR, 2022 5k Inventory, December 31 2021 30,000.00
IAR, 2021 10k Other Assets 52,000.00
Accounts Payable 75,000.00
IAR, 2020 8k DGP, 2021 96,000.00
DGP, 2020 22,500.00
1. Calculate the gross profit percentage on IS Capital Stock 100,000.00

for 2020, 2021, 2022 Retained Earnings 44,500.00

Sales 192,000.00
Installment Sales 500,000.00
2020 = 45% Purchases 455,000.00
2021 = 40% Repossessed Merchandise 10,000.00
Cost of Installment Sales 310,000.00
2022 = 38% Shipment on Installment Sales 310,000.00
2. Prepare the correcting entry for repossessions Loss of Repossessions 13,000.00
Operating Expenses 300,000.00
DGP, 2022 1,900 Totals 1,340,000.00 1,340,000.00

DGP, 2021 4,000 The inventory of new and repossessed merchandise on December 2022
DGP, 2020 3,600 was 35,000. The following account balances were reported in the post-
closing trial balance prepared on January 1, 2022.
Loss on Repossession 9,500
IAR, 2021 240,000
IAR, 2020 50,000
3. Prepare a balance sheet and income statement DGP, 2021 96,000
DGP, 2020 22,500
 The trial balance was prepared for WW Equipment, Inc., on December 2022 to reflect
At the end of December, before preparing the trial the transactions transpired in 2022:
balance, the bookkeeper made the following Debit Credit

incomplete entry: Cash 25,000.00

Installment Account Receivable, 2022 80,000.00
Repossessed Merchandise, 2021 10K Installment Account Receivable, 2021 20,000.00

Loss on Repossessions 13K Installment Account Receivable, 2020 5,000.00

Account Receivable 40,000.00
IAR, 2022 5k Inventory, December 31 2021 30,000.00
IAR, 2021 10k Other Assets 52,000.00
Accounts Payable 75,000.00
IAR, 2020 8k
2020 = 45% DGP, 2021 96,000.00
DGP, 2020 22,500.00
2021 = 40% 3. Prepare a balance sheet and Capital Stock 100,000.00
2022 = 38% income statement Retained Earnings 44,500.00
Sales 192,000.00
IS RS Total
Installment Sales 500,000.00
Sales 500,000.00 192,000.00 692,000.00
Purchases 455,000.00
COGS
Beg. Inventory 30,000.00 Repossessed Merchandise 10,000.00
Purchases 455,000.00 Cost of Installment Sales 310,000.00
Repossessed Shipment on Installment Sales 310,000.00
Merchandise 10,000.00 Loss of Repossessions 13,000.00
Inv. Avaiable for Sale 495,000.00 Operating Expenses 300,000.00
Less: Ending Inv (35,000.00) 310,000.00 150,000.00 460,000.00 Totals 1,340,000.00 1,340,000.00
GP 190,000.00 42,000.00 232,000.00
The inventory of new and repossessed merchandise on December 2022
Less: DGP 32,300.00 32,300.00 was 35,000. The following account balances were reported in the post-
closing trial balance prepared on January 1, 2022.
RGP 157,700.00 42,000.00 199,700.00
RGP on Prior Years 100,650.00 IAR, 2021 240,000
300,350.00 IAR, 2020 50,000
(3,500.00)
Opex 300,000.00 DGP, 2021 96,000
NI/NL (3,150.00) DGP, 2020 22,500
TRADE-
IN