Problems:

1. Oreo Company began operations on January 1, 2018 and appropriately uses

the installment sales method of accounting. The following data are available
for 2012 and 2019:
2018 2019
Installment sales P1,500,000 P1,800,000
Gross profit on sales 30% 40%
Cash collections from:
2018 sales 500,000 600,000
2019 sales - 700,000
The realized gross profit for 2019 is:

2. Filstate Co. is a real estate developer that began operations on January 2, 2019.
Filstate appropriately uses the installment method of revenue recognition.
Filstate sales are made on the basis of a 10% downpayment, with the balance
payable over 30 years. Filstate gross profit percentage is 40%. Relevant
information for Filstate first year of operations is as follows:

Sales P16,000,000
Cash collections 2,020,000
The realized gross profit and deferred gross profit at December 31, 2019 are:

3. Tayag Corp., which began operations in 2013, accounts for revenues using the
installment method. Tayag’s sales and collections for the year were P60,000
and P35,000, respectively. Uncollectible accounts receivable of P5,000 were
written off during 2013. Tayag’s gross profit rate is 30%. On December 31,
2013, what amount should Tayag report as deferred revenue?

Question 4&5

Reese Construction Corporation contracted to construct a building for

$1,500,000. Construction began in 2018 and was completed in 2019. Data
relating to the contract are summarized below:
Year ended
December 31,
2018 2019
Costs incurred $600,000 $450,000
Estimated costs to complete 400,000 —
 Reese uses the percentage-of-completion method as the basis for income
recognition. For the years ended December 31, 2018, and 2019, respectively,
Reese should report gross profit of
Carter Construction Company had a contract starting April 2019, to construct a
$15,000,000 building that is expected to be completed in September 2020, at an
estimated cost of $13,750,000. At the end of 2019, the costs to date were
$6,325,000 and the estimated total costs to complete had not changed. The
progress billings during 2019 were $3,000,000 and the cash collected during
2019 was $2,000,000. Carter uses the percentage-of-completion method.

4. For the year ended December 31, 2019, Carter would recognize gross profit on
the building of
a. $0.
b. $527,083.
c. $575,000.
d. $675,000.

5. At December 31, 2019, Carter would report Construction in Process in the

amount of
a. $6,900,000.
b. $6,325,000.
c. $5,900,000.
d. $575,000.

6. Quincy Enterprises uses the installment method of accounting and has the
following data at year-end:

Gross margin on cost 66 2/3%

Unrealized gross profit P192,000
Cash collection including down payments 360,000

What was the total amount of sale on installment

basis?

7. Online Corporation makes all of its sales on credit and accounts for them using
the installment method. For simplicity, assume that all sales occur on the first day
of the year and that all cash collections are made on the last day of the year.
Online Corporation charges 18% interest on the unpaid installment balance. Data
for 2018 and 2019 are as follows:
 Sales
Cost of goods sold 60,000 80,000
Cash collections (principal &
interest)
From 2018 sales 40,000 50,000
From 2019 sales 90,000

The interest income to be reported on 2019 is: __________

8. Collapse Construction Company has consistently used the percentage of
completion method of recognizing income. During 2019, Collapse entered into a
fixed price contract to construct an office building for P15,000,000. Information
relating to the contract is as follows:
December 31, December 31,
2019 2020
Percentage of completion 20% 60%
Total estimated cost P11,250,000 P12,000,000
Gross profit recognized 750,000 1,800,000
(cumulative)

What is the amount of contract cost incurred during 2020?

9. QRC Builders, Inc. has consistently used the percentage of completion method
of accounting for construction type of contracts. During 2019, QRC started a
work on a P6,750,000 fixed price construction contract that was completed in
2020. QRC’s accounting records disclosed the following:
December 31, December 31,
2019 2020
Cost incurred to date P2,925,000 P4,725,000
Estimated total cost 5,850,000 6,075,000

How much should be recognized as income for the year 2020?

10. Rabanera Company began operation at the beginning of 2019. During the year, it
had cash sales of P6,875,000 and sales on installment basis of P16,500,000.
Rabanera Company adds a markup on cost of 25% on cash sales and 50% on
installment sales.
Installment receivable at the end of 2019 is P6,600,000. Total realized gross profit
for 2019 is: ___________