Practical Accounting 2: Theory & Practice Advanced Accounting Installment Sales

PRACTICAL ACCOUNTING 2
THEORY & PRACTICE

ADVANCED ACCOUNTING
INSTALLMENT SALES
QUIZZER
Installments Sales
Revenue Recognition -Installment Sales
II. Introduction
Traditionally, under the Revenue Recognition Principle, revenue should be recognized when
two conditions exists:
1. The earning process is complete or virtually complete, and
2. An exchange has takes place.
These conditions was similarly indicated under PAS No. 18, wherein Revenue is recognized
when:
1. It is probable that future economic benefits will flow to the enterprise, and
2. These benefits can be measured reliably.
Therefore, generally, the realization is deemed to occur on the date of sale. Thus, the date of
the sale transaction is the moment that the revenue is recognized in the financial statement.
However, the exceptions to this are Installment Sales, Constructions Accounting (Chapter 5)
and Franchise Accounting
II. Installment Sales

Generally Accepted Accounting Principles states that the installment method of accounting for
sales is not acceptable unless circumstances exist such that collection of sales price is "not
reasonably assured." GAAP also permits use of the installment sales method when receivables
are collected over an extended period of time, and when there is no reasonable basis for
estimating the degree of collectability. It requires that revenue be recognized at the time of
collection. The installment sales method allows revenue to be deferred and recognized each
year in proportion to the receivables collected during that year. Receivable accounts and
deferred profit accounts must be kept separately for each year because the profit rate will often
vary from year to year.
A. Determining Gross Profit Rates:

For Prior Year(s) Sales:
Deferred Gross Profit, beginning of current year
Installment Accounts Receivable, beginning of current year
For Current Year:

Gross Profit Profit
Installment Sales
B. Recognition of Gross Profit Under Installment Sales Method

Prior Year(s)Current Year
Installment Accounts Receivable, beginning
Installments Sales - Lecture Page 3

ADVANCED ACCOUNTING
of the current year (Installment Sales -

current year) Pxxx Pxxx
Less: Installment Accounts Receivable,
end of the current year xxx xxx
Decrease in Installment Accounts Receivable Pxxx Pxxx
Less: Defaults, unpaid balance
(if any) xxx xxx
Collections in current year Pxxx Pxxx
Multiply by: Gross profit rate (based on sales) xx% xx%
RGP on installment sales for the current year Pxxx Pxxx
Determining Deferred Gross Profit, End of the Year:
Installment Accounts Receivable, end of the

current year Pxxx
Multiply by: Gross profit rate (based on sales). xx%
Deferred Gross Profit, end of the current year.. Pxxx
Or, alternatively:
Deferred gross profit before adjustment for RGP Pxxx
Less: Realized gross profit on installment sales xxx
• Deferred gross profit, end of the current year Pxxx
Determining gain or loss on repossession:
Estimated Resale Price after Reconditioning

Cost Pxxx
Less: Reconditioning Costs Pxxx
Normal profit xxx
Costs to sell xxx xxx
Fair market value/True worth of Repossessed

Merchandise Pxxx
Less: Unrecovered Cost:
Installment Accounts Receivable,
unpaid balance Pxxx
Less: Deferred gross profit xxx xxx
Gain or (loss) on repossession Pxxx
E. Determining Over or Underallowance of Trade-in Merchandise:

Installments Sales
Trade-in allowance Pxxx

Less: Fair market value/True Worth of Trade-in
Merchandise:
Estimated Resale Price after
Reconditioning Costs Pxxx
Less: Reconditioning costs xxx
Normal profit xxx
Cost to sell xxx xxx
Over or (Under) allowance Pxxx
III. Cost Recovery Method
Under exceptional circumstances, however, the cost recovery may be used.
1. The cost recovery method may be used where collectability of proceeds is highly uncertain,
where an investment is very speculative in nature, and/or where the final sale price is to be
determined by future events.
2. Under the cost recovery method, all amounts collected are treated as a recoupment of the
cost of the item sold, until the entire cost associated with the transaction has been recovered.
Only at this point profit is recognized.
Note to the Examinees:

A new problem was presented to illustrate the present value in valuing installment receivables/sales.
This is actually in conformity with PFRS No. 39 par. 45 (a), wherein "loans and receivables as defined
in par. 9, shall be measured at amortized cost using the effective interest method'.
This was also supported then by PAS 18 Example 8 of the Appendix (as amended by PAS 39J as
follows:
"Installment sales, under which the consideration is receivable in installments. Revenue attributable
to the sales price, exclusive of interest, is recognized at the date of sale. The sales price is the
present value of the consideration, determined by discounting the installments receivable at the
imputed rate of interest. The interest element is recognized as revenue as it is earned, using the
effective interest method."
Using effective interest method means that present value is a must. Amortized cost is assumed to
approximate the original invoice amount for short-term receivables with no stated interest rate if the
impact of discounting would not be significant.

ADVANCED ACCOUNTING
MCQ - Theory
1. Cash collection is a critical event for income recognition in the
Cost recovery Installment
method method
a. No No
b. Yes Yes
c. No Yes
d. Yes No Punzalan 2014
2. The installment method of recognizing profit for accounting purposes is acceptable if

a. Collections in the year of sale do not exceed 30% of the total sales price.
b. An unrealized profit account is credited.
c. Collection of the sales price is not reasonably assured.
d. The method is consistently used for all sales of similar merchandise. Punzalan 2014
3. Under the installment sales method,

a. Revenue, costs, and gross profit are recognized proportionately to the cash that is
received from the sale of the product.
b. Gross profit is deferred proportionately to cash uncollected from sale of the product, but
total revenue and costs are recognized at the point of sale.
c. Gross profit is not recognized until the amount of cash received exceeds the cost of the
item sold.
d. Revenues and costs are recognized proportionately to the cash received from the sale of
the product, but gross profit is deferred until all cash is received. Punzalan 2014
4. Under the cost recovery method of revenue recognition,
a. Income is recognized on a proportionate basis as cash is received on the sale of the
product.
b. Income is recognized when the cash received from the sale of the product is greater than
the cost of the product.
c. Income is recognized immediately.
d. None of these. Punzalan 2014
5. Winner Co. is engaged in extensive exploration for water in Utah. If, upon discovery of water,
Winner does not recognize any revenue from water sales until the sales exceed the costs of
exploration, the basis of revenue recognition being employed is the
a. Production basis c. Sales (or accrual) basis
b. Cash (or collection) basis d. Cost recovery basis Punzalan 2014
Installments Sales – MCQ Theory Page 6

Installments Sales
6. Chris Co. sells equipment on installment contracts. Which of the following statements best
justifies Chris' use of the cost recovery method of revenue recognition to account for these
installment sales?
a. The sales contract provides that title to the equipment passes to the buyer only when all
payments have beenmade.
b. No cash payments are due until one year from the date of sale.
c. Sales are subject to a high rate of return.
d. There is no reasonable basis for estimating collectability. Punzalan 2014
7. Leopard Co. uses the installment sales method to recognize revenue. Customers pay the
installment notes in 24 equal monthly amounts, which include 12% interest. What is the balance
of an installment note receivable 6 months after the sale? Punzalan 2014
a. 75% of the original sales price.
b. Less than 75% of the original sales price.
c. The present value of the remaining monthly payments discounted at 12%.
d. Less than the present value of the remaining monthly payments discounted at 12%.
8. When assets that have been sold and accounted for by the installment method are
subsequently repossessed and returned to inventory, they should be recorded on the books
at
a. Selling price.
b. The amount of the installment receivable less associated deferred gross profit.
c. Net realizable value.
d. Net realizable value minus normal profit. Punzalan 2014
9, The method most commonly used to report defaults and repossessions is
a. Provide no basis for the repossessed asset thereby recognizing a loss.
b. Record the repossessed merchandise at fair value, recording a gain or loss if
appropriate.
c. Record the repossessed merchandise at book value, recording no gain or loss.
d. None of these. Punzalan 2014
10. According to IAS 18. Revenue, which two of the following criteria must be satisfied before
revenue from the sale of goods should be recognized in profit or loss"
1. Revenue can be measured reliably.
2. Managerial control over the goods sold has been relinquished.
3. Ownership has been transferred to the buyer.
4. The outcome of the transaction is certain.
a. 1 and 2 c. 1 and 4
b. 1 and 3 d. 3 and 4 Punzalan 2014
Installments Sales – MCQ Theory Page 7

ADVANCED ACCOUNTING
MCQ - Problems
COST RECOVERY METHOD
Gross Profit
Year 1
11. On January 2, 2009, Colt Co. sold land that cost P600,000 for P800,000, receiving a note
bearing interest at 10%. The note will be paid in three annual installments of P321,700 starting
on December 31, 2009. Because collection of the note is very uncertain, Colt will use the cost
recovery method. How much revenue from this sale should Colt recognize in 2009?
a. 0 c. 8,000
b. 6,000 d. 20,000 Punzalan 2014
12. The following information pertains to a sale of real estate by RR Co. to SS Co. on December
31,2012:
Carrying amount P2,000,000
Sales price:
Cash P300,000
Purchase money mortgage 2,700,000 3,000,000
The mortage is payable in nine annual installments of P300,000 beginning December 31,2013 plus
interest of 10%. The December 31,2013 installment was paid as scheduled, together with interest
of P270,000. RR uses the cost recovery method to account for the sale. What amount of income
should RR recognize in 2013 from the real estate sale and its financing?
a. P570,000 b. P370,000
c. P270,000 d. P0 Guerrero 2013
Year 2
13. Several of Pitt, Inc.'s customers are having cash flow problems. Information pertaining to these
customers for the years ended March 31, 2009 and 2010 follows:
2009 2010
Sales 10,000 15,000
Cost of sales 8,000 9,000
Cash collections:
On 2009 sales 7,000 3,000
On 2010 sales 12,000
If the cost recovery method is used, what amount would Pitt report as gross profit from sales
to these customers for the year ended March 31, 2010?
a. 2,000 c. 5,000
b. 3,000 d. 15,000 Punzalan 2014
Installments Sales – MCQ Problems Page 8

Installments Sales
Total Income
14. On October 1,2011, Rodel Corporation, a real estate developer, sold land to Gerry Company
for P5,000,000. Gerry paid cash of P600,000 and signed a ten-year P4,400,000 note bearing
interest at 12%. The carrying amount of the land was P4,000,000 on the date of sale. The
note was payable in forty quarterly principal installments of P110,000 beginning January 2,
2012. Rodel appropriately accounts for the sale under the cost recovery method. On January
2, 2012, Gerry paid the first principal installment of P110,000 and interest of P132,000. For
the year ended December 31, 2012, what total amount of income should Rodel recognize
from the land sale and the financing?
a. 0 c. 508,200
b. 208,000 d. 309,640 Dayag 2013
15. The following information pertains to a sale of real estate by South Co. to Nord Co. on
December 31, 2009:
Carrying amount 4,000,000
Sales price:
Cash 600,000
Purchase money mortgage 5,400,000 6,000,000
The mortgage is payable in nine annual installments of P60Q,000 beginning December 31,
2010, plus interest of 10%. The December 31, 2010 installment was paid as scheduled,
together with interest of P540,000. South uses the cost recovery method to account for the
sale. What amount of income should South recognize in 2010 from the real estate sale and its
financing?
a. 1,140,000 c. 540,000
b. 740,000 d. 0 Punzalan 2014
Comprehensive
Questions 1 thru 6 are based on the following: Dayag 2013
16. Johnson Enterprises uses the cost recovery method for all installment sales.
Complete the following table:
2010 2011 2012
Installment sales P80,000 P95,000 P ?
Cost of installment sales ? 56,050 68,250
Gross profit percentage 38% ? 35%
Cash collections:
2010 sales 25,600 46,400 5,600
2011 sales 22,800 ?
2012 sales 32,550
Realized Gross Profit on Installment Sales ? ? 16,050

ADVANCED ACCOUNTING
The installment sales in 2012:

a. 92,137.50 c. 112,612.50
b. 105,000.00 d. 195,000.00
17. Using the same information in No. 16, the cost of installment sales in 2010:
a. Zero c. 47,619
b. 30,400 d. 49,600
18. Using the same information in No. 16, the gross profit rate in 2011:
a. 29% c. 59%
b. 41% d. Cannot be determined
19. Using the same information in No. 16, the collections in 2012 for 2011 sales:
a. 10,450 c. 43,700
b. 33,250 d. 48,600
20. Using the same information in No. 16, the realized gross profit on installment sales in 2010:
a. 9,728 c. 4,800
b. 7,049 d. Zero
21. Using the same information in No. 16, the realized gross profit on installment sales in 2011:
a. 8,664 c. 18,012
b. 9,348 d. 22,400
INSTALMENT SALES METHOD

Instalment Sales Amount
22. Jane Enterprises uses the installment method of accounting and it has the following data at
the year-end:
Gross margin on cost 66-2/3%
Unrealized gross profit P192,000
Cash collections including down payments 360,000
What was the total amount of sales on installment basis?
a. 480,000 c. 648,000
b. 552,000 d. 840,000 Dayag 2013

Installments Sales
Instalment Accounts Receivable

Year 2
23. Vic Corporation, which began business on January 1, 2011, appropriately uses the
installment sales method of accounting. The following data are available:
12/31/2011 12/31/2012
Balance of deferred gross profit on sales account:
2011 P300,000 P120,000
2012 440,000
Gross profit rate on sales 30% 40%
The installment accounts receivable balance at December 31,2012 is
a. 1,000,000 c. 1,400,000
b. 1,100,000 d. 1,500,000 Dayag 2013
24. Dolce Co., which began operations on January 1, 2008, appropriately uses the installment
method of accounting record revenues. The following information is available for the years
ended December 31, 2008 and 2009:
2008 2009
Sales 1,000,000 2,000,000

Gross profit realized on sales made in:
2008 150,000 90,000
2009 200,000
Gross profit percentage 30% 40%
What amount of installment accounts receivable should Dolce report in its December 31,
2009, balance sheet?
a. 1,225,000 c. 1,700,000
b. 1,300,000 d. 1,775,000 Punzalan 2014
Year 3
25. Cente, Inc. appropriately uses the installment method of accounting to recognize income in
its financial statements. Some pertinent data relating to this method of accounting include:
2010 2011 2012
Installment sales P300,000 P375,000 P360,000
Cost of installment sales 225,000 285,000 252,000
Gross profit P 75,000 P 90,000 P108,000

ADVANCED ACCOUNTING
Rate of gross profit on installment

sales 25% 24% 30%
2010 2011 2012
Balance of deferred gross profit
at year end: From 2010 sales P 52,500 P 15,000 P -
From 2011 sales 54,000 9,000
From 2012 sales 72,000
Total P 52,500 P 69,000 P 81,000
What amount of installment accounts receivable should be presented in Cente's December
31,2012 balance sheet?
a. P270,000 c. P279,000
b. 277,500 d. 300,000 Dayag 2013
26. The Company uses the installment method of accounting to recognize income.
Pertinent data are as follows:
2011 2012 2013
Installment sales P300,000.00 P375,000.00 P360,000.00
Cost of sales 225,000.00 285,000.00 252,000.00
Balance of Deferred Gross Profit at Year end
2011 P52,500.00 P15,000.00 P
2012 - 54,000.00 9,000.00
2013 - 72,000.00
The total balance of the Installment Accounts Receivable on December 31,2013 is:
a. P270,000 c. P279,000
b. P277,500 d. P300,000 Guerrero 2013
Cost of Installment Sales
27. The various documents and records which were recovered immediately after a fire gutted its premises,
EMC Marketing Co. gathered the following information (the company uses the installment method of
accounting):
2010 2011 2012
Installments sales P500,000 P800,000 P (?)
Cost of inst. sales ........................... (?) 600,000 (?)
Gross Profit on inst. sales (?) (?) 282,000
Collection on:
2010 sales 50,000 250,000 100,000
2011 sales - 200,000 500,000
2012 sales - - 400,000
Realized gross profit
on installments sales 11,000 (?) 241,000

Installments Sales
Based on the information given above, the cost of installment sale/for the year 2012 was:
a. 900,000 c. P932,000
b. 918,000 d. 940,000 Dayag 2013
Deferred Gross Profit

Year 1
28. Gema, Inc. began operations on January 1, 2011 and appropriately uses the installment
method of accounting. The following data are available for 2011:
Installment accounts receivable, 12/31/2011 P600,000
Installment sales for 2011 1,050,000
Gross profit on sales 40%
Under the installment method, Gema's deferred gross profit at December 31, 2011 would be
a. 360,000 c. 240,000
b. 270,000 d. 180,000 Dayag 2013
29. The Central Plains Subdivision sells residential subdivision lots on installment basis. The
following information was taken from the company's records as at December 31,2011:
Installment Accounts Receivable:
January 1,2011 P755,000
December31,2011 840,000
Unrealized Gross Profit, January 1, 2011 339,750
Installment Sales 950,000
How much is the balance of Unrealized Gross Profit as at December 31, 2011?
a. 378,000 c. 427,500
b. 339,750 d. 389,250 Dayag 2013
30. Lane Co., which began operations on January 1, 2009, appropriately uses the installment
method of accounting. The following information pertains to Lane's operations for the year
2009:
Installment sales 1,000,000

Regular sales 600,000
Cost of installment sales 500,000
Cost of regular sales 300,000
General and administrative expenses 100,000
Collections on installment sales 200,000
The deferred gross profit account in Lane's December 31, 2009 balance sheet should be
a. 150,000 c. 400,000
b. 320,000 d. 500,000 Punzalan 2014

ADVANCED ACCOUNTING
31. The Brownout, Inc., began operating at the start of the calendar year 2009, uses the
installment method of accounting:
Installment sales 400,000

Gross margin on cost 66 2/3%
Inventor)', December 31, 2009 80,000
General & administrative expense 40,000
Accounts receivable, December 31, 2009 320,000
The balance of the deferred gross profit account at December 31, 2009 should be:
a. 192,000 c. 96,000
b. 128,000 d. 80,000 Punzalan 2014
32. Kan Co. began operations on January 1,2009 and appropriately uses the installment method
of accounting. The following information pertains to Karr's operations for 2009:

The balance in the deferred gross profit account at December 31, 2009 should be
a. 120,000 c. 200,000
b. 150,000 d. 320,000 Punzalan 2014
33. Rosson corp., which began business on January 1, 2009, appropriately uses the installment
sales method of accounting for income.tax reporting purposes. The following data are available
for 2009:
Installment accounts receivable, 12/31 /09 200,000

Installment sales for 2009 350,000
Under the installment sales method, what would be Rosson's deferred gross profit at
December 31, 2009?
a. 120,000 c. 80,000
b. 90,000 d. 60,000 Punzalan 2014
34. Bally Company, which began operations on January 2,2013 appropriately, uses the installment
method of revenue recognition. The following data pertains to the company's operations for the
2013:
Installment sales P1,000,000

Installments Sales

Installment accounts receivable written off 50,000
What is the balance of Deferred Gross Profit account - 2013 on December 31, 2013?
a. P500,000 c. P400,000
b. P150,000 d. P320,000 Guerrero 2013
35. 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?
a. P10,500 c. P7,500
b. P9,000 d. P6,000 Guerrero 2013
Year 2
36. Since there is no reasonable basis for estimating the degree of collectibility, Bloopers
Company uses the installment method of revenue recognition for the following sales:
2012 2011
Sales P450,000 P300,000
Collection from:
2011 sales 50,000 100,000
2012sales 150,000 -0-
Accounts written-off:
2011 sales 75,000 25,000
2012sales 25,000 -0-
What amount should Bloopers report as deferred gross profit in its December 31, 2012,
balance sheet for the 2011 and 2012 sales?
a. 75,000 c. 112,500
b. 80,000 d. 125,000 Dayag 2013
37. On January 1, 2011, Art Company sold its idle plant facility to Tony, Inc. for P1,050,000. On
this date, the plant had a depreciated cost of P735,000. Tony paid P150,000 cash on January
1, 2011 and signed a P900,000 note bearing interest at 10%. The note was payable in three
annual installments of P300,000 beginning January 1,2012. Art appropriately accounted for the

ADVANCED ACCOUNTING
sale under the installment method. Tony made a timely payment of the first installment on
January 1,2012 of P390,000 which included interest of P90,000 to date of payment. At
December 31, 2012, Art has deferred gross profit of
a. 153,000 c. 225,000
b. 180,000 d. 270,000 Dayag 2013
38. Lang Co. uses the installment method of revenue recognition. The following data pertain to
Lang's installment sales for the year ended December 31, 2008 and 2009:
2008 2009
Installment receivables at year end on 2008 sales 60,000 30,000
Installment receivables at year end on 2009 sales 69,000
Installment sales 80,000 90,000
Cost of sales 40,000 60,000
What amount should Lang report as deferred gross profit in its December 31,2009 balance
sheet?
a. 23,000 c. 38,000
b. 33,000 d. 43,000 Punzalan 2014
39. On January 2, 2009, Blake Co. sold a used machine to Cooper Inc. for P900,000 resulting to
a gain of P270,000. On that date, Cooper paid P150,000 cash and signed a P750,000 note
bearing interest at 10%. The note was payable in three annual installments of P250,000
beginning January 2, 2010. Blake appropriately accounted for the sale under the installment
method. Cooper made a timely payment of the first installment on January 2, 2010, of
P325,000, which included accrued interest of P75,000. What amount of deferred gross profit
should Blake report at December 31, 2010?
a. 150,000 c. 180,000
b. 172,500 d. 225,000 Punzalan 2014
40. On January 1, 2008, Rex Co. sold a used machine to Lake, Inc. for P525,000. On this date,
the machine had a depreciated cost of P367,500. Lake paid P75,000 cash on January 1,
2008 and signed a P450,000 note bearing interest at 10%. The note was payable in three
annual installments of P150,000 beginning January 1, 2009. Rex appropriately accounted for
the sale under the installment method. Lake made a timely payment of first installment on
January 1, 2009 of P195,000, which included interest of P45,000 to date of payment.
At December 31, 2009, Rex had deferred gross profit of

a. 105,000 c. 90,000
b. 99,000 d. 76,500 Punzalan 2014

Installments Sales
41. Since there is no basis for estimating the degree of collectability, Astor Co. uses the installment
method of revenue recognition for the following sales:
2009 2008
Sales 900,000 600,000
Collections from:
2008 sales 100,000 200,000
2009 sales 300,000 -
Accounts written off:
2008 sales 150,000 50,000
2009 sales 50,000 -
What amount should Astor report as deferred gross profit in its December 31,2009 balance
sheet for the 2008 and 2009 sales?
a. 150,000 c. 225,000
b. 160,000 d. 250,000 Punzalan 2014
42. Kanlaon Corporation started operations on January 1, 2012, selling home appliances and
furniture sets both under cash and under installment basis. Data on the installment sales
operations for the two years ended December 31,2012 and 2013 are as follows:
2012 2013
Installment sales P400,000 P500,000
Cost of installment sales 240,000 350,000
Cash collections on:
2012 installment contracts 210,000 150,000
2013 installment contracts - 300,000
The balance of the Deferred Gross profit account on December 31, 2013 is:
a. P130,000 c. P190,000
b. P160,000 d. P76,000 Guerrero 2013

ADVANCED ACCOUNTING
43. Tear Drops Corp. started operations on 1 January 2012 selling home appliances and furniture on
installment basis. For 2012 and 2013 the following represented operational details.
In Thousand Pesos
2012 2013
Cost of installment sales 720 1,050
Collections on installment sales
2012 630 450
2013 0 900
On January 2013, an installment sale account in 2010 defaulted and the merchandise with a market
value of P15,000 was repossessed. The related installment receivable balance as of date of default
and repossession was P24,000.
The balance of the unrealized gross profit as of the end of 2013 was
a. P218,400 c. P360,000
b. P192,000 d. P275,000 Guerrero 2013
44. Nike Company, which began operations on January 5,2012, appropriately uses the installment
method of revenue recognition. The following information pertains to the company's operations for
2012 and 2013:
2012 2013
Sales P300,000 P450,000
Collections from:
2012 sales 100,000 50,000
2013 sales -0- 150,000
Accounts written off from
2012 sales 25,000 75,000
2013 sales -0- 150,000
Gross profit rates 30% 40%
What amount should Nike Company report as deferred gross profit in its December 31,2013
statement of financial position?
a. P 75,000 c. P112,000
b. P 80,000 d. P125,000 Guerrero 2013

Installments Sales
Realized Gross Profit

3 Months
45. Gianne Co., sold a computer on installment basis on October 1, 2011. The unit cost to the
company was P86,400, but the installment selling price was set at P122,400. Terms of
payment included the acceptance of a used computer with a trade-in allowance of P43,200.
Cash of P7,200 was paid in addition to the traded-in computer with the balance to be paid in
ten monthly installments due at the end of each month commencing the month of sale.
It would require P1,800 to recondition the used computer so that it could be resold for P36,000.
A 15% gross profit was usual from the sale of used computer. The realized gross profit from
the 2011 collections amounted to:
a. 5,760 c. 11,520
b. 14,100 d. 48,960 Dayag 2013
46. On October 1, 2010, Surplus Co. sold equipment on installment basis. The equipment costs
the company an amount of P600,000, but the installment selling price was set at P850,000.
The terms of payment included the acceptance of a used equipment with the balance to be
paid in ten (10) monthly installment due at the end of each month commencing the month of
sale. It would require P12,500 to recondition the used equipment so that it could be sold for
P250,000. A 15% gross profit was usual from sale of used equipment. What is the realized
gross profit from the 2010 collections?
a. 70,588 c. 100,000
b. 80,000 d. 340,000 Punzalan 2014
47. On October 2013, Haybol Realty Co. sold to Mae Balay a property for P500,000 which it carried in
its books for P250,000. The company received P100,000 on the date of the sale and a mortgage
note for P400,000 payable in twenty (20) semiannual installments of P20,000 plus interest on the
unpaid principal at 16% per annum.
The realized profit to be recognized by Haybol Realty Co. in 2013 if gross profit is recognized
periodically in proportion to collections would be
a. P50,000 c. P60,000
b. P100,000 d. P250,000 Guerrero 2013
48. Action Inc. sold a fitness equipment on installment basis on October 1,2013. The unit cost to the
company was P60,000 but the installment selling price was set at P85,000. Terms of payment
included the acceptance of a used equipment with a trade-in value of P30,000. Cash of P5,000
was paid in addition to the traded-in equipment with the balance to be paid in ten monthly
installments due at the end of each month commencing the month of sale. It would require P1,250
to recondition the used equipment so that it could be resold for P25,000. A 15% gross profit was

ADVANCED ACCOUNTING
usual from sale of used equipment. The realized gross profit from the 2013 collections
amounted to
a. P4,000 c. P10,000
b. P34,000 d. P8,000 Guerrero 2013
Year 1
49. Asser Computer Co. began operation at the beginning of 2012. During the year, it had cash
sales of P6,875,000 and sales on installment basis of P16,500,000. Asser adds a markup on
cost of 25% on cash sales and 50% on installment sales. Installments receivable at the end
of 2012 is P6,600,000. Total realized gross profit for 2012 is:
a. 1,375,000 c. 4,675,000
b. 3,300,000 d. 3,575,000 Dayag 2013
50. On January 2, 2009, Easy Pay Co. sold a plant to Menchie Co. for P1,500,000. On that date,
the plant's carrying amount was P1,000,000. Menchie gave Easy Pay P300,000 cash and a
P1,200,000 note, payable in four annual installments of P300,000 plus 12% interest. Menchie
made the first principal and interest payment of P444,000 on December 31, 2009. Easy Pay
uses the installment method of revenue recognition. In its 2009 income statement, what amount
of realized gross profit should Easy Pay report?
a. 344,000 c. 148,000
b. 200,000 d. 100,000 Punzalan 2014
51. The Central Plains Subdivision sells residential subdivision lots in installment. The following
information was taken from the accounting records of Central Plains Subdivision as at
December 31, 2009:
Installment accounts receivable, 1/1/09 755,000

Installment accounts receivable, 12/31 /09 840,000
Unrealized gross profit, 1/1/09 339,750
How much is the realized gross profit in 2009?
a. 427,500 c. 378,000
b. 339,750 d. 389,250 Punzalan 2014
52. Hill Company began operations on January 1, 2009, and appropriately uses the installment
method of accounting. Data available for 2009 are as follows:
Installment accounts receivable, 12/31/09 500,000

Cost of goods sold, as percentage of sales 60%

Installments Sales
Using the installment method, Hill's realized gross profit for 2009 would be
a. 360,000 c. 200,000
b. 240,000 d. 160,000 Punzalan 2014
53. Laya Co., which began operations on January 2, 2013,'appropriately uses the installment sales
method of accounting. The following information is available for 2013:
Installment accounts receivable, December 31,2013 P800,000
Deferred gross profit, December 31, 2013
(before recognition of realized gross profit for 2013) 560,000
For the year ended December 31, 2013, realized gross profit on sales should be
a. P320,000 c. P320,000
b. P340,000 d. P240,000 Guerrero 2013
54. Lacoste Corporation has been using the cash method of revenue recognition. All sales are
made on account with notes receivable given by the customers. The income statement for
2013 presented the following data:
Revenues - collection on principal P32,000
Revenues - interest 3,600
Cost of goods purchases (includes inventory of goods
on hand of P2,000) 45,200
The balances due on the notes on December 31 were as follows:
Notes receivable P62,000
Unearned interest income 7,167
Assuming the use of the installment method of revenue recognition, what is the realized gross
profit on December 31,2013?
a. P16,080 c. P18,060
b. P25,586 d. P43,633 Guerrero 2013
Year 2
55. MM Company began operations on January 1, 2011 and appropriately uses the installment
method of accounting. The following data are available for 2011 and 2012
2011 2012
Installment sales P1,200,000 P1,500,000
Cash collections from:
2011 sales 400,000 500,000
2012 sales 600,000
Gross profit on sales 30% 40%

ADVANCED ACCOUNTING
The realized gross profit for 2012 is

a. 240,000 c. 440,000
b. 390,000 d. 600,000 Dayag 2013
56. Sta. Lucia Realty Corporation sells residential subdivision lots on installment basis. The following data
were taken from the company's accounting records as of December 31, 2013. The company
uses a uniform gross profit rate:
Installment accounts receivable:
January 1,2013 P1,510,000
December 31,2013 1,680,000
Unrealized gross profit - January 1,2013 679,500
Installment sales - 2012 , 1,180,000
Installment sales - 2013 1,900,000
How much is the gross profit realized during the year 2013?
a. P778,500 c. P756,500
b. P679,500 d. P630,500 Guerrero 2013
57. Mango Company, which sells appliances started operations on January 10, 2013 operates on a
calendar year basis, and uses the installment method of revenue recognition. The following
data were taken from the 2010 and 2011 accounting records:
2012 2013
Gross profit rates based on cost 25% 20%
Cash collections on 2012 sales 130,000 240,000
Cash collections on 2013 sales 160,000
What is the amount of realized gross profit to be recognized on December 31, 2013?
a. P124,500 c. P92,000
b. P100,667 d. P74,667 Guerrero 2013
58. Oro Company began operations on January 1, 2012 and appropriately uses the installment
sales method of accounting. The following data are available for 2012 and 2013:
2012 2013
Installment sales P1,500,000 P1,800,000
Gross profit on sales 30% 40%
Cash collections from:
2012 sales 500,000 600,000
2013 sales 700,000

Installments Sales
The realized gross profit for 2013 is:

a. P720,000 c. P460,000
b: P520,000 d. P280,000 Guerrero 2013
Year 3
59. The following table are available for Charo Company:
2010 2011 2012
Installment sales P50,000 P80,000 P ?
Cost of installment sales ? ? 91,800
Gross profit ? ? 28,200
Gross profit percentage ? 25% ?
Cash collections
2010 sales ? 25,000 10,000
2011 sales ? 20,000 50,000
2012 sales ? 45,000
Realized Gross Profit on Installment Sales 1,100 10,500 ?
Using installment method, compute the realized gross profit in 2012:
a. 10,575 c. 2,200
b. 12,500 d. 25,275 Dayag 2013
60. Conrado Motors sells locally manufactured jeepneys on the installment basis. The
information presented below relates to operations during the past three years:
2012 2011 2010
Cost of inst. sales P8,765,625 P7,700,000 P4,950,000
Dec. 31 balance:
Inst. R'ble, 2012 9,728,125
Inst. R'ble, 2011 3,025,000 8,387,500
Inst. R'ble, 2010 1,512,500 4,812,500
Gross profit rate 32% 30% 28%
Conrado Motors uses the installment method of accounting, what would the company report
as total realized gross profit for the year 2012?
a. 1,012,000 c. 3,753,750
b. 3,044,250 d. 6,993,250 Dayag 2013

ADVANCED ACCOUNTING
61. Dipolog Company sells appliances on the installment basis. Below are information for the
past three years:
2012 2011 2010
Cost of sales 450,000 375,000 260,000
Collections on:
2012 installment sales... 275,000
2011 installment sales... 180,000 240,000
2010 installment sales... 125,000 120,000 150,000
Repossessions on defaulted accounts included one made on a 2012 sale for which the unpaid
balance amounted to P5,000. The depreciated value of the appliance repossessed was
P2,500.
The realized gross profit in 2012 on collections of 2012 installment sales was:
a. 108,000 c. 221,250
b. 110,000 d. 221,500 Dayag 2013
62. DJ Co. accounts for installment sales on the installment basis. On January 1, 2012, ledger
accounts included the following balances:
Installment Receivable - 2010 P38,500
Installment Receivable - 2011 155,000
Deferred Gross Profit - 2010 11,550
On December 31,2012, account balances before adjustments for realized grass profit on
installment sales were:
Installment Receivable - 2010 P none
Installment sales in 2012 were made at 42% above cost of merchandise.
The total realized gross profit on installment sales in 2012:
a. 132,510 c. 97,510
b. 98,910 d. 102,834 Dayag 2013

Installments Sales
Year 1 & Year 2
Questions 1 & 2 are based on the following: Punzalan 2014

Joker Corp. had been using the cash method to account for income since its first year of
operation in 2008. All sales are made on a credit with note receivable given by the customer.
The following information were made available for the first two years of operations:
2008 2009
Notes receivable 2008 216,000 144,000
Notes receivable 2009 240,000
Discount on notes receivable 2008 28,668 22,316
Discount on notes receivable 2009 32,172
Income - collection on principal 128,000 200,000
Income - interest 14,400 22,000
Cost of goods purchased 200,560 208,080
Cost of goods purchased includes increase in inventory of goods on hand of P20,000 in 2008
and P32,000 in 2009.
63. How much is the realized gross profit for the year ended 2008 (rounded to the nearest peso)?
a. 21,000 c. 54,707
b. 46,588 d. 60,814
64. How much is the realized gross profit for the year ended 2009 (rounded to the nearest peso)?
a. 93,272 c. 104,397
b. 97,080 d. 113,650
Interest Income
Year 2
65. Watson Co. sold some machinery to the Finney Co. on January 2, 2009. The cash selling price
would have been P473,850. Finney entered into an installment sales contract which required
annual payments of P125,000, including interest at 10% over five years. The first payment was
due on December 31, 2009. What amount of interest income should be included in Watson's
2010 income statement (the second year of the contract)?
a. 12,500 c. 25,000
b. 39,624 d. 34,885 Punzalan 2014

ADVANCED ACCOUNTING
Total Gross Profit Realized

66. The Jade Appliance Company started business on January 1, 2013. Separate accounts were
established for installment and cash sales. On installment sales, the price was 106% of the cash
sales price. A standard installment contract was used whereby a down-payment of 1/4 of the
installment price was required, with the balance payable in 15 equal monthly installment. (The
interest charge per month is 1% of the unpaid cash sale price equivalent at each installment).
Installment receivable and installment sales were recorded at the contract price. When contracts
were defaulted, the unpaid balances were charged to Bad Debts Expense. The following data are
available:
Sales:
Cash sales P126,000
Repossessed sales 230
Inventory, January 1,2013:
Merchandise inventory 58,060
Purchases, 2013
New merchandise 209,300
Inventories, physical, December 31,2013
Repossessed inventory 180
Cash collections on installment contract 2013:
Down payments 66,250
Subsequent installments (including interest of P9,252.84 on
all contracts except on defaulted contracts) 79,341
Five contracts totaling P1,060 were defaulted, in each case after 3 monthly installments were paid.
Interest should be recognized in the period earned.
The total realized gross profit on December 31,2013 is:
a. P99,024.85 c. P99,184.85
b. P99,084.87 d. P95,024.85 Guerrero 2013
67. In its first year of operations, Giant Corp. reported cost of goods sold in the amount of
P900,000 and sales were as follows:
Mark-up on cost Sales

Cash basis 25% 250,000
Charge basis 33 1/3% 400,000
Installment basis 50% 600,000
If collections on installment sales during the year amounted to P240,000.

Installments Sales
How much was the total gross profit realized at the end of the year?
a. 50,000 c. 80,000
b. 60,000 d. 230,000 Punzalan 2014
68. The Samsing Music Corp. sells musical instruments on installment. On October 1, 2008,
Samsing sold a karaoke costing PI5,000 for P24,000. It has been the policy of Samsing to
require its customers a down payment of P2,400 for this kind of instrument and the balance
to be paid on installment with an annual interest of 12% starting October 31, 2008. Periodic
payments are equal in amount and represent interest on the balance of the principal owed
between installment periods, the remainder a reduction in the principal balance. The karaoke
was repossessed in February 2009, when the customer defaulted after paying a total of
P9,600. It was estimated that the karaoke had a depreciated cost of P8,400 when repossessed.
The Samsing Music Corp. uses perpetual inventory account and enters the total deferred gross
profit at the time of sale. How much is the total realized gross profit from this sale (rounded to
the nearest peso)?
a. 2,411 c. 4,356
b. 3,312 d. 4,500 Punzalan 2014
69. United Trading accounts for sales under the installment method. On January 2013 its ledger
accounts included the following balances:
Installment Receivable, 2011 P38,500
Installment Receivable, 2012 155,000
Deferred Gross Profit, 2011 11,550
Installment sales in 2013 were made at a 42% gross profit rate. December 31, 2013 account
balances before adjustment were as follows:
Installment Receivable, 2011 P-0-
a. P90,350 c. P98,910
b. P97,510 d. P97,350 Guerrero 2013

ADVANCED ACCOUNTING
70. In its first year of operations, Guijo Company's sales were as follows:
Sales Basis Mark-up on Cost Sales
Cash 25% P250,000
Charge 33-1/3% 400,000
Installment 50% 600,000
The cost of goods sold for the year was P900,000.
If collections on installment sales during the year amounted to P240,000, how much was the
total gross profit realized at the end of the year?
a. P50,000 c. P80,000
b. P60,000 d. P230,000 Guerrero 2013
Net Income
71. On December 31, 2009, Mill Co. sold construction equipment to Drew, Inc. for P1,800,000. The
equipment had a carrying amount of P 1,200,000. Drew paid P300,000 cash on December 31,
2009 and signed a PI,500,000 note bearing interest at 10%, payable in five annual installments
of P300,000. Mill appropriately accounts for the sale under the installment method. On
December 31, 2010, Drew paid'P300,000 principal and PI50,000 interest. For the year ended
December 31, 2010, what total amount of revenue should Mill recognize from the construction
equipment sale and financing?
a. 250,000 c. 120,000
b. 150,000 d. 100,000 Punzalan 2014
72. The books of Paiyakan Company show the following balances on December 31,2009:
Accounts receivable 313,750

Deferred gross profit (before adjustment) 38,000
Analysis of the accounts receivable reveal the following

Regular accounts 207,500
2008 installment accounts 16,250
2009 installment accounts 90,000
Sales on an installment basis in 3008 were made at 30% above cost; in 2009, at 33 1/3%
above cost. Expenses paid was P1,500 relating to installment sales. How much is the net
income on installment sales?
a. 11,000 c. 16,000
b. 11.500 d. 10,250 Punzalan 2014

Installments Sales
73. The following data were taken from the records of Camille Appliance Company before its
accounts were closed for the year 2013. The company sells exclusively on the installment basis
and it uses the installment method of recognizing profit:
2009 2010 2011

Operating expenses 100,000 94,000 96,000
Balances as of December 31:
Inst. Contracts Receivable-2011 220,000 110,000 28,000
Inst. Contracts Receivable - 2012 250,000 92,000
Inst. Contracts Receivable-2013 238,000
During 2013, because some customers can no longer be located, the company wrote off P9,000
of the 2011 installment accounts and P2,800 of the 2012 installment accounts as uncollectible.
Also during 2013, a customer defaulted and the company repossessed merchandise
appraised at P2,400 after costs of reconditioning estimated at P400. The mer chandise had
been purchased in 2011 by a customer who still owed P5,000 at the date of the
repossession.
The total comprehensive income on December 31,2013 is:
a. P157,156 c. P60,156
b. P61,000 d. P59,156 Guerrero 2013
74. Gray Co., which began operations on January l, 2013, appropriately uses the installment method of
accounting. The following information pertains to Gray operations for the 2013:
Installment sales P500,000
In its December 31,2013 statement of financial position, what amount should Gray report as deferred
gross profit?
a. P250,000 c. P160,000
b. P200,000 d. P75,000 Guerrero 2013

ADVANCED ACCOUNTING
75. Filstate Co. is a real estate developer that began operations on January 2, 2013. 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, 2013 are:
a. P 808,000 and P5,592,000
b. P5,040,000 and P808,000
c. P5,600,000 and P808,000
d. P808,000 and P6,400,000 Guerrero 2013
76. Long Co., which began operations on January 1, 2013, appropriately uses the installment method
of accounting. The following information pertains to Long's operations for the year 2013:
What is the total comprehensive income on December 31, 2013?
a. P400,000 c. P300,000
b. P200,000 d. P100,000 Guerrero 2013
Comprehensive
Realized Gross Profit & Cash Collections
77. TT Company, which began business on January 1, 2011, appropriately uses the installment
sales method of accounting. The following data are available for 2008:
Installment accounts receivable, 12/31/11 P200,000
Deferred gross profit, 12/31/11 (before recognition
of realized gross profit) 140,000
The cash collections and the realized gross profit on installment sales for the year ended
December 31,2011 should be
Cash collections Realized gross profit
a. P100,000 P80,000
b. 100,000 60,000
c. 150,000 80,000
d. 150,000 60,000 Dayag 2013

Installments Sales
78. Luge Co., which began operations on January 2, 2009, appropriately uses the installment
method of accounting. The following information is available for 2009:
Installment accounts receivable

December 31, 2009 800,000
Deferred gross profit, Dec. 31 (before
Recognition of realized gross profit for 2009) 560,000
For the year ended December 31, 2009, cash collections and realized gross profit
on sales should be
Cash Realized
Collections Gross Profit
a. 400,000 320,000
b. 400,000 240,000
c. 600,000 320,000
d. 600,000 240,000 Punzalan 2014
79. Polo Company appropriately uses the installment sales method of recognizing revenue. On
December 31, 2013, the accounting records show unadjusted balances of the following:
Installment accounts receivable - 2011 P12,000

Installment accounts receivable - 2012 40,000
Deferred gross profit - 2011 10,500
Gross profit rates:
2011 35%
2012 34%
2013 32%
For the year ended December 31,2013, compute (1) total realized gross profit and (2) the total
cash collections in 2013:
a. (1) P182,000; and (2) P135,400
b. (1) P 76,000; and (2) P233,000
c. (1) P158,000; and (2) P368,400
d. (1) P106,000; and(2)P 97,600 Guerrero 20

ADVANCED ACCOUNTING
Realized Gross profit, Interest Income & Gross Profit Rate

Questions 1 thru 3 are based on the following: Punzalan 2014
Abenson Trading Co. sells household furniture both in cash and in installment basis. For each
installment sale, a sale contract is made whereby the following terms are stated:
a. A down payment of 25% of the installment price is required and the balance payable in
15 equal monthly installment.
b. Interest of 1% per month is charged on the unpaid cash sale price equivalent at each
installment.
c. The price on installment sales is 110% of the cash sales price.
For accounting purposes, installment sales are recorded at contract price. Any unpaid balances
on defaulted contracts are being charged to uncollectible accounts expense. Sales of defaulted
merchandise were credited to uncollectible accounts expense. Interest are recognized in the
period earned. For its first year of operations ending December 31, 2009, the books of the
company show the following:
Cash sales 378,000
Merchandise inventory, January 1 174,180
Purchases 627,891
Merchandise inventory, December 31 108,630
Cash collections on installment contracts:
Down payment 198,750
Installment payments (include interest of
P27.758.52). Average 6 monthly
Installments on all contracts except on
Defaulted contracts. 238,023
A contract amounting to P3,300 was defaulted after paying three (3) monthly installments.
80. The gross profit rate based on total sales at cash price equivalent is:
a. 33.75% c. 40.88%
b. 36.34% d. 37%
e. Answer not given
81. The total interest earned for the first four month in the defaulted contracts is:
a. 80.85 c. 60.94
b. 72.07 d. 69.30
e. Answer not given
82. The realized gross profit for the year 2009 is:
a. 291,355.95 c. 249,674.52
b. 151,335.35 d. 161,789.16
e. Answer not give

Installments Sales
Realized Gross Profit & Interest Income

Questions 1 & 2 are based on the following: Dayag 2013
83. Dudong Electronics makes all of its sales on credit and accounts for them using the
installment sales 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. Dudong Electronics
charges 18% interest on the unpaid installment balance Data for 2011 and 2012 are as
follows:
2011 2012
Sales P100,000 P120,000
Cost of goods sold 60,000 80,000
Cash collections (principal and interest)
2011 sales 40,000 50,000
2012 sales 90,000
The interest income recognized in 2012 amounted to:
a. 14,040 c. 35,640
b. 21,600 d. 49,700
84. Using the same information in No. 80, compute the realized gross profit in 2012:
a. 14,384 c. 37,184
b. 22,800 d. 39,600
Realized & Deferred Gross Profit

85. Baker Co. is a real estate developer that began operations on January 2, 2008. Baker
appropriately uses the installment method of revenue recognition. Baker's sales are made on
the basis of a 10% down payment, with the balance payable over 30 years. Baker's gross profit
percentage is 40%. Relevant information for Baker's first two years of operations is as follows:
2009 2008
Sales 16,000,000 14,000,000
Cash collections 2,020,000 1,400,000
At December 31, 2008, Baker's deferred gross profit was
a. 5,040,000 c. 8,400,000
b. 5,600,000 d. 12,600,000
86. Baker's realized gross profit for 2009 was

a. 6,400,000 c. 1,212,000
b. 2,020,000 d. 808,000

ADVANCED ACCOUNTING
87. Sarao Motors sells locally manufactured jeeps on installment basis. Data presented below relates
to the company's operations for the last three calendar years:
2013 2012 2011
Cost of installment sales P8,765,625 P7,700,000 P4,950,000
Gross profit rates on sales 32% 30% 28%
Installment accounts receivable, 12/31:
From 2013 sales 9,728,125
From 2012 sales 3,025,000 8,387,500
From 2011 sales 1,512,500, 4,812,500
On December 31, 2013 how much is the (1) total realized gross profit and (2) deferred gross
profit?
a. (1) P3,044,250; and (2) P4,020,500
b. (1) P3,044,250; and (2) P4,125,000
c. (1) P3,733,750; and (2) P4,020,500
d) (1) P6,993,250; and (2) P4,020,500 Guerrero 2013
88. White Plains, Inc. sells residential lots on installment basis. The following data was taken from the
accounting records of the company as at December 31, 2013:
Installment accounts receivable, January 1 P755,000
Installment accounts receivable, December 31 840,000
Deferred gross profit, January 1 339,750
Complete (1) the realized gross profit on December 31, 2013 and (2) the balance of the
Deferred Gross Profit account on December 31, 2013.
a. (1) P389,250; and (2) P378,000
b. (1) P427,500; and (2) P389,250
c. (1) P330,750; and (2) P427,000
d. (1) P378,000; and (2) P339,250 Guerrero 2013
Deferred Gross Profit & Net Income

89. On January 2,2011, the following are some data of the Claire Hills Subdivision, a fully-
developed subdivision which started sales in 2011. All sales are on a five-year installment
plan. The sales terms provide for a 15% down payment, with the balance payable in 60
monthly installments. An interest of 12% per annum on the unpaid amount is to be paid with
the monthly installments.

Installments Sales
Area of subdivision
200 subdivision lots, various sizes 52,250 Sq. M.
Road lots. 23,750 Sq. M.
Parks, reserved for public use 4,000 Sq. M.
Total 80,000 Sq. M
Cost of subdivision
Cost of raw land, 80,000 sq. m P2,375,000
Surveying and laying monuments 45,000
Filling and leveling sub-grade land 130,000
Curbs, gutters, and drainage 310,000
Road bracing, filling, and paving 2,175,000
Electric light posts and lines 190,000
Total P5,225,000
The total selling price of the 200 subdivision lots, per the price lists, is P9,500,000.
Total installment sales in 2011 P3,450,000
Installment receivable, Dec. 31,2011 1,594,600
Interest income in 2011 520,300
Operating expenses in 2011 682,130
Compute the (1) unrealized gross profit on December 31,2011, and (2) the net income for
2011. Dayag 2013
a. (1) P717,570; (2) P1,355,230 c. (1)P 877,030; (2) P673,100
b. (1) 717,570; (2) 673,100 d. (1)1,552,500; (2) 1,355,230
Accounts Receivable & Deferred Gross Profit

90. These data pertain to installment sales of Kester Store:
- Down payment: 20%
- Installment sales: P545,000 in 2010; P785,000 in 2011; and, P968,000 in 2012.
- Mark-up on cost: 35%
- Collections after down payment: 40% in the year of sale, 35% in the year after, and 25%
in the third year.
Compute the (1) Installment Accounts Receivable at the end of 2012, and (2) total unrealized
gross profit at the end of 2012. Dayag 2013
a. (1) P621,640; (2) P217,547 c. (1) P464,640; (2) P161,166
b. (1) 464,640; (2) 217,574 d. (1) 621,640; (2) 161,166

ADVANCED ACCOUNTING
Accounts Receivable, Cash Collection & Interest Rate

91. On September 30, 2011, Barry bought a car for P3,600,000. A down payment of P1,600,000
was made, with the balance due in 10 monthly installments, the first to be made at the end of
October. Barry is to make monthly payments of P200,000 plus interest on the unpaid balance
at 12%. What is the total collection on January 31, 2012?
a. P200,000 c. P216,000
b. 214,000 d. 218,000
92. Using the same information in No. 91 and Barry is to make equal monthly payments, each
payment to apply first as interest at 12% on the unpaid principal and the balance as a
reduction in principal, such equal payments are calculated to be P211,164.15. What is the
unpaid balance of the installment receivable on January 31, 2012?
a. 1,000,000 c. 1,223,796.90
b. 1,200,000 d. 1,420,753.51
93. Using the same information in No. 91, what is the approximate effective interest rate if
monthly payments of P200,000 plus interest at 12% charged on the original principal amount
of P360,000?
a. 10% c. 32.73%
b. 12% d. 39.38%
Accounts Receivable, Realized & Unrealized GP

These data pertain to installment sales of Mickey's Store:
 Down payment, 20%.
 Installment sales: P545,000 in Year 1; P785,000 in Year 2; and P968,000 in Year 3.
 Mark-up on cost, 35%.
 Collections after down payment: 40% in the year of sale, 35% in the year after sale, and
25% in the third year.
94. The realized gross profit in year 1 is:

a. 109,357 c. 99,190
b. 73,474 d 114,825
95. The unrealized gross profit for installment sales made during Year 2 as of the end of Year 2
is:
a. 97,689 c. 141,112
b. 131,880 d. 114,063

Installments Sales
96. The installment accounts receivable at the end of Year 3 is:

a. 652,722 c. 602,991
b. 621,640 d. 685,358
97. The unrealized gross profit at the end of Year 3 is:
a. 211,047 c. 198,574
b. 161,166 d. 217,574
DEFAULTS & REPOSSESSIONS

Inventory of Repossessed Merchandise
98. M & J Corp. which sells goods on installment basis, recognizes at year end gross profit on
collections which consisted of cost and gross profit. It reported the following:
January 1 December 31
Installment receivables
2011 P120,100 0
2012 1,722,300 P337,200
2013 0 2,050,450
Sales and cost of sales for the three years are as follows:
2011 2012 2013
Sales P1,900,000 P2,160,000 P3,010,000
Cost of sales 1,235,000 1,425,000 1,896,300
In 2013 the company repossessed merchandise with resale value of P8,500 from customers who
defaulted in payments. The sales were made in 2012 for P27,000 on which PI6,000 was collected
prior to default. As collections are made, the company debits cash and credits installment receivable.
For default and repossessions, the company debits installment receivable. The amount of adjustment
on the inventory of repossessed merchandise to the extent of the unrealized gross profit was
a. Zero c. a decrease of P2,500
b. a decrease of P6,240 d. a decrease of P3,740 Guerrero 2013
Gain(Loss) on Repossession
Loss
99. Gizelle, Inc. started operation at the beginning of 2012, selling home appliances exclusively
on the installment basis. Data for 2011 and 2012 follows:
2011 2012
2011 installment accounts, end 285,000 22,500
2012 installment accounts, end - 300,000

ADVANCED ACCOUNTING
On May 31,2012, a 2011 installment account of P37.500 was defaulted and the appliance was
repossessed. After reconditioning at a cost of P750, the repossessed appliance would be
priced to sell for P30,000.
The gain (loss) on repossession amounted to:
a. 3,000 c. 9,000 Dayag 2013
b. (9,000) d. (3,750)
100. Fryman Furniture uses the installment-sales method. No further collections could be made on
an account with a balance of P18,000. It was estimated that the repossessed furniture could
be sold as is for P5,400, or for P6,300 if P300 were spent reconditioning it. The gross profit
rate on the original sale was 40%. The loss on repossession was:
a. P4,500 c. P12,000
b. P4,800 d. P12,600 Dayag 2013
101. Spicer Corporation has a normal gross profit on installment sales of 30%. A 2009 sale
resulted in a default early in 2011. At the date of default, the balance of the installment
receivable was P24,000, and the repossessed merchandise had a fair value of P13,500.
Assuming the repossessed merchandise is to be recorded at fair value, the gain or loss on
repossession should be:
a. P 0 c. a P3,300 loss
b. P3,300 gain d. a P7,500 loss Dayag 2013
102. The Molino Furniture Company appropriately used the installment sales method in
accounting for the following installment sale. During 2011, Molino sold furniture to an
individual for P3,000 at a gross profit of P1,200. On June 1, 2011, this installment account
receivable had a balance of P2,200 and it was determined that no further collections would
be made. Molino, therefore, repossessed the merchandise. When reacquired, the
merchandise was appraised as being worth only P1,000. In order to improve its salability,
Bengal incurred costs of P100 for reconditioning. Normal profit on resale is P200. What
should be the loss on repossession attributable to this merchandise?
a. 220 c. 320
b. 620 d. 880 Dayag 2013
103. Wood Corp. has a normal gross profit on installment sales of 30%. A 2007 sale resulted in a
default early in 2009. At the date of default, the balance of the installment receivable was
P8,000, and the repossessed merchandise had a fair value of P4,500. Assuming the
repossessed merchandise is to be recorded at fair value, the gain or loss on repossession should
be
a. 0 c. 1,100 gain
b. 1,100 loss d. 2,500 loss Punzalan 201

Installments Sales
104. A sale on installment basis was made in 2013 for P8,000 at a gross profit of P2,800. At the end of
2013, when the installment account receivable had a balance of P3,500, it was ascertained
that the customer would be unable to make further payments. The merchandise was then
repossessed and was appraised at a value of PI,500. The loss on repossession was:
a. P3,500 c. P775
b. P2,000 d. P1,775 Guerrero 2013
105. Four J Co. sold goods on installment. For the year just ended the following were reported:
Cost of installment sales 2,025,000
Collections on installment sales 1,800,000
Repossessed accounts 200,000
Fair market value of repossessions 120,000
The gain (loss) on repossession is:
a. (P15,000) c. P( 80,000)
b. P 15,000 d. P5,000 Guerrero 2013
Gain
106. Oliver Co. uses the installment-sales method. When an account had a balance of P8,400, no
further collections could be made and the dining room set was repossessed. At that time, it
was estimated that the dining room set could be sold for P2,400 as repossessed or for
P3,000 if the company spent P300 reconditioning it. The gross profit rate on this sale was
70%. The gain or loss on repossession was a
a. P5,880 loss c. P 600 gain
b. P6,000loss d. P 180 gain Dayag 2013
107. Gentiy Co. uses the installment sales method. When an account had a balance of P3,500, no
further collections could be made and the dining room set was repossessed. At that time, it
was estimated that the dining room set could be sold for P1,000 as repossessed, or for
P1,300 if the company spent P125 reconditioning it. The gross profit rate on this sale was
70%. What is the gain or loss on repossession?
a. 2,450 loss c. 300 gain
b. 2,500-loss d. 125 gain Punzalan 2014
108. A refrigerator was sold to Fernandina Castro for P16,000, which included a 40% markup on
selling price. She made a down payment of 20%, payment of four of the remaining 16 equal
payment and defaulted on further payments. The refrigerator was repossessed, at which time the
fair value was determined to be P6,800.

ADVANCED ACCOUNTING
The repossession resulted to the following (loss) gain:

a. P(1,040) c. P 4,056
b. P1,040 d. P 2,960 Guerrero 2013
Profit is Recognized in Point of Sale & Gross Profit is recognized in proportion to collections
109. In August, 2012, Mega World Inc. sold condominium units costing P1,440,000 for P2,400,000
receiving P350,000 cash and a mortgage note for the balance payable in monthly installments.
Installment received m 2010 reduced the principal of the note to a balance of P2,000,000. The
buyer defaulted on the note at the beginning of 2013, and the property was repossessed. The
property had a fair market value of P1,150,000 at the time of repossession.
Compute the gain (loss) on repossession if (1) profit is recognized at the point of sale and (2) gross
profit is recognized in proportion to collections.
a. (1) P(850,000); and (2) P( 50,000)
b. (1) P(850,000); and (2) P(450,000)
c. (1)P 850,000; and (2) P(450,000)
d. (1)P(50,000); and (2) P50,000 Guerrero 2013
Realized Gross Profit

110. Mr. Mafias is a dealer in appliance who sells on an installment basis. A refrigerator which
originally cost P9,240 was sold by him for P16,500 to Jose who made a down payment of
P2,200, but defaulted in subsequent payments.
Mr. Matias repossessed the refrigerator at an appraised value of P4,600. To improve its
salability, he expended P600 for reconditioning. He was able to sell the refrigerator to Pedro
for P10,000 at a down payment of the first installment of P2,500.
The realized gross profit from the (1) first installment sale - Jose; (2) from the second
installment sale - Pedro are: Dayag 2013
a. (1) P968; (2) P1,350 c. (1) P 968; (2) P1,200
b. (1) 264; (2) 1,200 d. (1) 2,304; (2) 1,350
111. EMC Motors, a dealer of motor vehicle, sales exclusively on installment basis. One of its
customers, Mr. Ambo purchased a motorcycle for P45,375. The cost to EMC was P25,410.
After making an initial payment of P6,050, Mr. Ambo defaulted on subsequent payments.
EMC lost no time in repossessing the motor vehicle which, by this time, was appraised at a
value of P12,650. EMC had to incur additional cost of repairs/ remodelling of P1,650 before
the motor vehicle was subsequently resold for P27,500 to Mr. Joey who made an initial
payment of P6,875.
How much profit was realized on the sale to Mr. Joey?
a. P3,025 c. P3,575
b. 3,300 d. 3,850 Dayag 2013

Installments Sales
112. Partial trial balance of Lakan Appliance Corporation as of the end of the fiscal year September
30, 2013 follows:
Debit Credit
Deferred gross profit - 2012 P50,000
Installment contract receivable - 2012 P12,500
Installment contract receivable — 2013 150,000
Inventory, September 30,2012 62,500
Loss on repossessions 3,750
Purchases 435,000
Repossessions 2,500
Sales 312,500
The post-closing trial balance on September 30,2012 shows the following balances of certain
accounts:
Deferred gross profit – 2012 50,000
The gross profit rate on regular sales during the year was 30%.
The inventory of new and repossessed merchandise on September 30, 2013 amounted to
P75,000. Unpaid balance on repossessed merchandise sale of 2012 isP6,250.
a. P141,875 c. P 40,625
b. P101,250 d. P140,875 Guerrero 2013
113. The 680 Appliance Company reports gross profit on the installment basis. The following data are
available:
2011 2012 2013
Cost of goods- installment sales 180,000 181,250 216,000
Gross Profit 60,000 68,750 84,000
Collections:
2011 installment contracts P 45,000 P 75,000 P 72,500
2013 installment contracts 62,500
Defaults:
Unpaid balance of 2011 installment contracts P 12,500 P 15,000
Value assigned to repossessed merchandise 6,500 6,000
Unpaid balance of 2012 installment contracts 16,000
Value assigned to repossessed merchandise 9,000

ADVANCED ACCOUNTING
The total realized gross profit after loss on repossession for 2013 is:
a. P49,775 c. P 48,975
b. P 57,625 d. P56,625 Guerrero 2013
114. Mr. Matias Manuel is a dealer in appliance who sells on an installment basis. A refrigerator which
originally cost P924 was sold by him for P1,650 to Jose Santos who made a down payment of
P220, but defaulted in subsequent payments.
Mr. Manuel repossessed the refrigerator at an appraised value of P460. To improve its salability,
he expended P60 for reconditioning. He was able to sell the refrigerator to Pedro Reyes for P1,000
at a down payment of the first installment of P250.
The realized gross profit from the first installment sale (to Jose Santos) and from the second
installment sale (to Pedro Reyes) are:
a. P96.80 and P100
b. P26.40 and P120
c. P96.80 and P120
d. P26.40 and P100 Guerrero 2013
115. On January 1, 2012 Blim Company commenced its sales of gas stoves. Separate accounts
were set up for installment and cash sales, but perpetual inventory record was not kept. On the
installment sales a down payment of 1/3 was required, with the balance payable in 18 equal
monthly installments.
The transactions of the Blim Company are as follows:
2012 2013
Sales:
New gas stoves for cash P27,000 P37.000
New gas stoves on installment
(including the 1/3 cash down payment) 235,000 330,000
Purchases 193,000 215,000
Physical inventories at December 31:
New gas stoves at cost 45,500 60,000
Cash collections on installment contracts, exclusive of down payments:

2012 sales 54,000 77,000
2013 sales - 70,000
The realized gross profit for the year 2013 that would be reported on the income statement
amounted to:
a. P131,530 c. P123,350
b. P140,000 d. P131,500 Guerrero 201

Installments Sales
Comprehensive
Realized & Deferred Gross Profit
116. Jing Trading Company, which started operations on January 2, 2012, sells video equipment on
installment terms. Whenever a contract is in default, Jing repossesses the merchandise and
writes this off to a Loss on Defaulted Contracts ac¬ count. Information regarding the repossessed
goods are not recorded in the books but are kept on a memo basis. Proceeds from the sale of
these goods are credited to the Loss on Defaulted Contracts account. The following information
are taken from the books of Jing:
December 31
2013 2012
Installment Contracts Receivable, 2012 P 2,000 P31,500
Installment Contracts Receivable, 2013 40,000
Sales 125,000 75,000
Loss on Defaulted Contracts 4,275 250
Allowance for Defaulted Contracts 2,250 2,250
Additional information:
a) No repossessed video equipment was sold in 2012 or 2013 for more than the unpaid
balance of the original contract. A further analysis of the Loss on Defaulted
Contracts account showed the following breakdown:
2012 2013
Contracts Contracts
Contracts written off P3,750 P1,500
Less: Sales of repossessed goods 800 175
Loss a Defaulted Contracts P2,950 P1,325
The repossessed goods on hand on December 31, 2013, all of which were repossessed from 2012
contracts, are valued at P200.
b) The P2,000 balance of the Installment Contracts Receivable 2012 account is
currently due and collectible.
c) The gross profit rates on installment sales were 40% in 2012 and 42% in 2013.
d) The rate of bad debts loss for 2013 is estimated to be the same as the 2012
experiences rate based on sales:
The required balance of the allowance for Defaulted Contracts account and the realized gross profit
on December 31,2013 from 2012 sales are:
a. P3,675 and P10,300
b. P3,675 and P 9,300
c. P3,575 and P10,300
d. P4,675 and P 9,300 Guerrero 201

ADVANCED ACCOUNTING
Cost of Repossessed Merchandise & Gain (Loss) on Repossession

117. Sharon Company uses the installment sales method in accounting for its installment sales.
On January 1, 2011, Sharon Company had an installment account receivable from Rowena
with a balance of P18,000. During 2011, P4,000 was collected from Rowena. When no
further collection could be made, the merchandise sold to rowena was repossessed. The
merchandise had a fair market value of P6,500 after the company spent for P600 for
reconditioning of the merchandise. The merchandise was originally sold with a gross profit
rate of 40%.
Determine the gain or loss on repossession and cost of repossessed merchandise,

respectively:
a. P2,500 loss; P6,500 c. P2,500 gain; P5,900
b. P2,100 loss; P6,500 d. P2,100 gain; P5,900 Dayag 2013
Deferred Gross Profit & Gain (Loss) on Repossession

118. Gloria Corporation started operations on January 1, 2011 selling home appliances and
furniture sets both for cash and on installment basis. Data on the installment sales operation
of the company gathered for the years ending December 31, 2011 and 2012 were as follows:
2011 2012
Cash collected on installment sales
On January 5, 2013 an installment sale in 2011 was defaulted and the merchandise with an
appraised value of P5,000 was repossessed. Related installment receivable balance on
January 5, 2013 was P8,000.
(1) The balance of Deferred Gross Profit on December 31, 2012, and (2) the gain or (loss) on
repossession in 2013.
a. (1) P130,000; (2) P200 c. (1) P 76,000; (2) P1,800
b. (1) 76,000; (2) 200 d. (1) 130,000; (2) (200) Dayag 2013

Installments Sales
Realized Gross Profit & Accounts Receivable

119. On January 1, 2011 Blue Company commenced its sales of gas stoves. Separate accounts were set
up for installment and cash sales, but perpetual inventory record was not kept. On the installment sales
a down payment of 1/3 was required, with the balance payable in 18 equal monthly installments. The
company adjusted its records at the end of each year to the "installment basis" by use of a deferred
gross profit account. When contracts were defaulted, the unpaid balances were charged to a bad debts
expense account, and sales of repossessed merchandise were credited to this account. At the end of
the year the expense account was adjusted to reflect the actual loss.
The transactions of the Blue Company are as follows:
2011 2012
Sales:
New gas stoves for cash P 27,000 P 37,000
New gas stoves on installment
(including the 1 /3 cash down payment) 235,000 330,000
Repossessed gas stove 750 875
Purchases 193,000 215,000
Physical inventories at December 31:
New gas stoves at cost 45,500 60,000
Repossessions at appraised value 180 200
Unpaid balances of installment contracts defaulted:
2011 sales 3,580 4,650
2012 sales - 3,750
Cash collections on installment contracts,
exclusive of down payments:
2011 sales 54,000 77,000
2012 sales - 70,000
Compute the (1) balance of Installment Accounts Receivable - 2011 on December 31, 2012, and (2)
The realized gross profit for the year 2012.
a. (1) P17,437; (2) P114,880 c. (1) P22,087; (2) P131,500
b. (1) 17,437; (2) 131,530 d. (1) 22,087; (2) 114,880 Dayag 2013
Realized Gross Profit, Interest Income & Unrecovered Cost

120. On January 1, 2011, Janette Company sold 20,000 square meters of farmland for P600,000
to Michelle, taking in exchange a 10% interest bearing note Janette Company purchased the
farmland in 2011 at a cost of P500,000. The note will be paid in three installments of
P241,269 including interest each on December 31, 2011, 2012, and 2013. Shortly, after the
sale Janette Company learns distressing news about Michelle's financial circumstances and
because collection is so uncertain and decides to account for the sale using the cost recovery
method.

ADVANCED ACCOUNTING
Determine the Realized Gross Profit and Interest Income for the year 2012, and Unrecovered
Cost as of December 31,2012, respectively.
a. P -0- ; P -0- ; P -0-
b. P -0- ; P -0- ; P17,462
c. P -0- ; P60,000; P177,462
d. P33,233; P -0- ; P -0- Dayag 2013
Realized Gross Profit & Gain(Loss) on Repossession

121. The following data were taken from the records of Samely Company, before the accounts are
closed for the year 2012. The company sells exclusively on the installment basis and uses
the installment method of recognizing profit.
2010 2011 2012
Operating expenses 100,000 94,000 104,000
Balances as of Dec. 31:
Inst. Contracts Rec'ble 2010 220,000 110,000 28,000
Inst. Contracts Rec'ble 2011 250,000 92,000
Inst. Contracts Rec'ble 2012 238,000
Deferred gross profit - 2010 44,000 44,000
Deferred gross profit - 2011 95,000 95,000
During 2012, because the customers can no longer be located, the company wrote off
P9,000 of the 2010 accounts and P2,800 of the 2011 accounts as uncollectible, and the entry
made was:
Operating expenses 11,800
Inst. contracts receivable 2010 9,000
Also during 2012 a customer defaulted and the company repossessed merchandise appraised
at P4,000 after costs of reconditioning estimated at P400. The merchandise had been
purchased in 2010 by a customer who still owed P5,000 at the date of repossession. The entry
made was:
Inventory of repossessed merchandise 5,000
Compute the (1) total realized gross profit on installment sales for the year 2012, and (2) The
gain (loss) on repossession:
a. (1) P57,156; (2) P(960) c. (1) P 86,176; (2) P(960)
b. (1) 70,986; (2) 600 d. (1) 157,156; (2) 600

Installments Sales
122. Using the same information in Number 121, the correcting entry for write-offs:
a. Deferred gross profit - 2010 3,600
Operating Expenses 4,664
b. Deferred gross profit 4,664
c. Realized gross profit 4,664
d. Operating Expenses 4,664
123. The Ana Motors Company makes all sales on installment contracts and accordingly reports
income on the installment basis. Installment contracts receivables are accounted for by
years. Defaulted contracts are recorded by debiting Loss on Repossession account and
crediting the appropriate Installment Contract Receivable account for the unpaid balance at
the time of default. All repossessions and trade-ins are recorded at realizable values. The
following data relate to the transactions during 2011 and 2012.
2011 2012
Installment contract receivable, 12/31
2011 sales 80,000 25,000
2012 sales 95,000
Purchases 100,000 120,000
New merchandise inventory, 12/31 at cost 10,000 26,000
The company auditor disclosed that the inventory taken on December 31, 2012 did not include
certain merchandise received as trade-in on December 2, 2012 for which an allowance was
given. The appraised value of the merchandise is P1,500 which was also the allowance on the
trade-in. No entry was made to record this merchandise on the books at the time it was
received. In 2012, a 2011 contract was defaulted and the merchandise was repossessed. At
the time of default, the repossessed merchandise had an appraised value of P2,500. The
repossessed merchandise was neither recorded nor included in the physical inventory on
December 31, 2012.
Compute the (1) total realized gross profit on sales in 2012 and (2) gain (loss) on
repossession.
a. (1) P70,000; (2) P 100 c. (1) P50,400; (2) P(1,100)
b. (1) 70,000; (2) (1,100) d. (1) 19,600; (2) 3,500 Dayag 2013

ADVANCED ACCOUNTING
124. James Smith Appliance Co., sold an equipment costing P10,000 for P16,000 on September
30, 2011. The down payment was P1,600, and the same amount was to be paid at the end of
each succeeding month. Interest was charged on the unpaid balance of the contract at 112 of
1 % a month, payments being considered as applying first to accrued interest and the
balance to principal.
After paying a total of P6,400, the customer defaulted. The equipment was repossessed in
January 5, 2012. It was estimated that the equipment had a value of P5,600.
Compute the (1) total realized gross profit on installment sales and (2) the gain (loss) on
repossession (rounded)
a. (1) P2,328; (2) P521 c. (1) P2,400; (2) P(400)
b. (1) 2,400; (2) 400 d (1) 2,328; (2) (521) Dayag 2013
125. Marceliano Sales Corp. accounts for sales on the installment basis. The balances of the
control accounts for Installment Contracts Receivable at the beginning and end of 2012 were:
Jan. 1, 2012 Dec. 31, 2012

Installment Contracts Receivable - 2010 P 24,020 -
Installment Contracts Receivable - 2011 344,460 P 67,440
Installment Contracts Receivable - 2012 - 410,090
During 2012, the company repossessed a refrigerator which had been sold in 2011 for
P5,400 and P3,200 had been collected prior to default. The company sales and cost of sales
figures are summarized below:
2010 2011 2012

Net Sales P380,000 P432,000 P602,000
Cost of Sales 247,000 285,120 379,260
Marceliano Sales Corp. values the repossessed goods at market value. The resale price of the
repossessed merchandise amounted to P1,700.
(1) The gain (loss) or repossession; and (2) the total realized gross profit on installment sales
for the year 2012: Dayag 2013
a. (1) P(381); (2) P172,852.50 c. (1) P248; (2) P172,852.50
b. (1) (381); (2) 71,006.70 d. (1) 248; (2) 71,006.70

Installments Sales
126. Following data pertain to Mabait Company which sells appliances on the installment basis:
2010 2011 2012
Installment Sales P390,000 P420,000 P480,000
Cost of Sales 237,900 243,600 288,000
From Sales Made in

2010 2011 2012
Installment Accounts
Receivable balances:
Jan. 1, 2012 P 24,000 P300,000
Dec. 31, 2012 - 60,000 P320,000
Repossessions on defaulted accounts were made during 2012, as follows:
From Sales Made in

2011 2012
Account balance P10,000 P5,000
Appraised value of repossessed merchandise 4,500 3,500
(1) The total realized gross profit on installment sales in 2012, and (2) net gain (loss) on
repossession on defaulted contracts of 2011 and 2012. Dayag 2013
a. (1) P62,000; (2) P(800) c. (1) P167,960; (2) P (800)
b. (1) 167,960; (2) 800 d. (1) 96,600; (2) (1,300)
127. The Mercy Sales Co. employs the perpetual inventory basis in its accounting for new cars.
On August 15, 2011, a new car was sold to Rose Castro with a list price of P220,000 costing
P165,000. It granted Ms. Castro an allowance of P85,000 for her old car as trade-in, the
current value of which was estimated to be P81,700. The balance of P135,000 was payable
as follows: Cash at time of purchase P35.000, balance in 20 monthly payment of P5,000, first
payment being made on September 1,2011. On April 1, 2012, Ms. Castro defaulted in the
payment of March 1, 2012 installment. The new car sold was repossessed; its value to the
seller is P40,000. (use two decimal places for gross profit percentage)
(1) The total realized gross profit on installment sales in 2011 and (2) gain (loss) on
repossession in 2012. Dayag 2013
a. (1) P32,617; (2) P(15,811) c. (1) P32,617; (2) P(13,298)
b. (1) 37,889; (2) (13,298) d. (1) 87,966; (2) 13,298

ADVANCED ACCOUNTING
128. The Jaja Sales Co. which began the appliances business on January 1, 2010 reports gross
profit on the installment basis. The following information relative to the installment sales are
available:
2010 2011 2012
Gross profit P 90,000 P103,125 P126,000
Collections:
2010 installment contracts P67,500 P112,500 P108750
Defaults:
Unpaid balance of 2010
installment contracts P 18,750 P 22,500
Value assigned to repossessed
merchandise 9,750 9,000
Unpaid balance of 2011
installment contracts 24,000
Value assigned to repossessed
merchandise 13,500
(1) The realized gross prom on installment sales during 2012, and (2) the loss on
repossession during the year 2012: Dayag 2013
a. (1) P86,437.50; (2) P12,225 c. (1) P86,437.50; (2) P11,775
b. (1) 90,300.00; (2) 11,775 d. (1) 88,687.50; (2) 34,275
129. The following selected accounts appeared in the trial balance of Union Sales as of December
31,2012:
Debit Credit
Installment Receivable-2011 sales P15,000 P
Installment Receivable-2012 sales 200,000
Inventory, December 31, 2011 70,000
Purchases 555,000
Repossession 3,000
Sales (Regular) 385,000
Unrealized Gross Profit 2011 54,000

Installments Sales
Installment Receivable - 2011 sales, as of
December 31, 2011 120,000
Inventory of new and repossessed merchandise
as of December 31, 2012 95,000
Gross Profit percentage of regular sales during
the year 30% on sales
Repossession was made during the year. It was a 2011
sale and the corresponding uncollected account
at the time of repossession was P7,750.
(1) The total realized gross profit on installment sales in 2012, and (2) gain (loss) on
repossession in 2012:
a. (1) P129,262.50; (2) P(1,262.50)
b. (1) 85,500.00; (2) (1,262.50)
C (1) 129,262.50; (2) 1,262.50
d. (1) 85,500.00; (2) 1,262.50 Dayag 2013

The Zonyo Company on October 1, 2008, sold, article "A" for P4,000, costing P2,700. Article "B", a
used article was accepted as down payment and the balance on a monthly installment payment of
P200 starting November 1, 2008. PI,200 was allowed on the article traded-in. The company
estimates reconditioning cost of P80 on this article and a sales price of PI,100 after such
reconditioning. The company normally expect 20% gross profit on sale of used articles. The company
employs the perpetual method of inventoty. On April 1, 2009, the customer defaulted in the payment
of installment. Article "A" which was sold was repossessed; its value to the seller is P 1,350 allowing
for reconditioning cost and a nomial gross profit on resale.
130. The amount of realized gross profit in 2008 is:
a. 300 c. 315
b. 400 d. 415
e. 350
131. The amount of loss on repossession is:

a. 415 c. 300
b. 315 d. 450
e. 350

ADVANCED ACCOUNTING

Romer Realty bought two adjoining lots (Lot A and B) with total area of 1,600 sq. m. Lot A was
bought for PI60,000 in 2004 and Lot B was bought for P240,000 in 2005. Romer Realty re-
subdivided the two lots and made a 400 sq.m. lot out of the original two lots by taking 200 sq.
m. from each to make Lot C. The cost of Lot C was by allocating a portion of the cost of the
original two lots. Romer Realty build a house on Lot C at a cost of PI52,000. It was completed
on June 30, 2009, and had an estimated useful life of 20 years.
The three lots and house were sold during 2009 on the following terms:
Date of Sales Down

Lot Sale Price Payment Balance
A. Mar. 31 171,428 51,428 120,000
B Oct. 31 240,000 80,000 160,000
C & house June 30 420,000 180,000 240,000
Balance payable in equal installment
Lot A 12,000 every 3 months
Lot B 20,000 every 2 months
Lot C & house 40,000 every 6 months
Installment payment is to be applied first to accrued interest and the balance to a reduction of
principal. The rate of interest is 10% per annum on the carrying balance of the principal. After
repeated demand from the buyer of Lot C and house, he failed to meet the installment due on
June 30, 2010, and the property was repossessed.
132. The realized gross profit from the sale of the lots and house on December 31, 2009 are:
LotC&
Lot A LotB house Total
a. 23,733.33 25,333.33 78,300.00 127,366.66
b. 24,333.33 24,533.33 86,700.00 135,566.66
c. 23,732.58 24,333.33 83,200.00 131,265.91
d. 24,733.33 25,333.33 86,500.00 136,566.66
133. The gain (loss) on repossession of Lot C and house on June 30, 2009 is:
a. 119,650 c. (17,200)
b. 117,200 d. (21, 611)
e. None-of these

Installments Sales

The following selected accounts appeared in the trial balance of Union Sales as of December
31,2009:
Debit Credit
Installment receivable, 2008 15,000
Installment receivable, 2009 200,000
Inventory, 12/31/08 70,000
Purchases 555,000
Repossession 3,000
Sales (regular) 385,000
Unrealized gross profit, 2008 54,000
Installment receivable, 2008 sales as of
December 31,2008 120,000
Inventory of new and repossessed
merchandise as of December 31, 2009 95,000
Gross profit percentage on regular
sales during the year 30% on sales
Repossession was made during the year. It was a
2008 sale and the corresponding uncollected
account at the time of repossession 7,750
134. The gross profit realized on collections for installment sales in 2008 was:
a. 47,250.00 c. 43,762.50
b. 50,737.50 d. Answer not given
135. The gross profit realized on collections for installment sales in 2009 was:
a. 87,075.00 c. 85,500.00
b. 88,672.50 d. answer not given
136. The loss on repossession made on a 2008 sale was:

a. 1,262.50 c. 1,805.00
b. 487.50 d. Answer not given

ADVANCED ACCOUNTING

Pacific Corp. uses the installment method of reporting. The following data were gathered for its three
years of operations:
2007 2008 2009
Installment sales 300,000 405,000 495,000
Gross profit rate 30% 40% 35%
Balance of installment receivable, Dec. 31:
2007 installment sales 180,000 135,000 60,000
2008 installment sales 300,000 195,000
2009 installment sales 390,000
In 2009, a customer defaulted; accordingly, the merchandise with an estimated value of

P15,000 was repossessed. The sale was made in 2007 and the unpaid balance on the date of
repossession was P22,500.
137 What is the total realized gross profit in 2009?

a. 412,500 c. 94,500
b. 183,750 d. 36,750
138. What is the amount of gain (loss) on repossession in 2009?

a. (7,500) c. 6,000
b. (750) d. 3,000
139. The Famcor Sales Company employs the perpetual inventory basis in the accounting for new cars.
On August 15,2012, a new car costing PI65,000 and with a list price of P220,000 was sold to
Rose Castro. The company granted Ms. Castro an allowance of P85,000 on the trade-in of her old
car, the current value of which was estimated to be P81,700; the balance of P135,000 was
payable as follows: P35,000 cash at the time of purchase and twenty monthly payments of
P5,000 starting September 1,2012.
On April 1, 2013, Ms. Castro defaulted in the payment of the March 1, 2013, installment. The
new car sold was repossessed, and its value to the seller was P40,000.
The total realized gross profit and the gain (loss) on repossession on December 31, 2013 are:
a. P32,616.62 and (P13,298.00)
b. P32,616.62 and P13,298.00
c. P37,388.62 and P15,810.62
d. P27,844.62 and (PI5,810.62) Guerrero 2013

Installments Sales
140. Presented below is the unadjusted trial balance, as of December 31,2013 of Moslim Products
Corporation: Guerrero 2013
Cash P 5,000
Installment Accounts Receivable - 2012 40,000
Installment Accounts Receivable - 2013 140,000
Inventory, December 31,2013 200,000
Other Assets 497,000
Trade Accounts Payable P 50,000
Unrealized Gross Profit-2011 10,000
Unrealized Gross Profit - 2012 86,000
Unrealized Gross Profit - 2013 100,000
Capital Stock 600,000
Retained Earnings 80,000
Repossession Gain 6,000
P932,000 P932,000
The cost of goods sold had been uniform over the years at 60% of sales, and the company adopts
perpetual inventory procedures. On installment sales, the company charges installment accounts
receivable and credits inventory and unrealized gross profit accounts.
Repossessions of merchandise have been made during 2013 due to some customers' failure to
pay maturing installments. The analysis of these transactions have been summarized as
follows:
Inventory P7.500
Unrealized gross profit - 2011 800
Unrealized gross profit - 2012 2,400
Repossession gain 2,700
The repossessed merchandise were unsold at December 31, 2013 and it was ascertained that
these were booked, upon repossession, at their original cost. A fair valuation would be a sales price
of P10,000 after reconditioning cost of P1,000 and a normal gross profit.
The realized gross profit from 2013 sales and the gain (loss) on repossession on December 31,
2013 are:
a. P44,000 and (P200)
b. P44,000 and P200
c. P56,000 and P300
d. P56,000 and P200

ADVANCED ACCOUNTING
141. The following selected accounts appeared in the trial balance of Union Sales as of December 31
2013:
Debit Credit
Installment Accounts Receivable, 2012 Sales P15,000
Installment Accounts Receivable, 2013 Sales 200,000
Inventory, December 31,2012 70,000
Purchases 555,000
Repossessions 3,000
Regular Sales P385,000
Unrealized Gross Profit, 2012 54,000
Installment Accounts Receivable, 2012 Sales, as of December 31, 2012 P120,000
Inventory of new and repossessed merchandise, December 31,2013 95,000
Gross profit rate on regular sales during the year 30%
Repossession was made during the year on a 2012 sale and the corresponding uncollected
amount at the time of repossession was P7,750.
The total realized gross profit on December 31,2013 and the (loss) on repossession are:
a. P 85,500.00 and P (1,262.50)
b. P129,262.50 and P(1,262.50)
c. P 43,762.50 and P1,262.50
d. P119,622.50 and P1,262.50 Guerrero 2013
142. The Julia Appliance company makes all sales on installment contracts and accordingly reports
income on the installment basis. Installment contracts receivables are accounted for by years.
Defaulted contracts are recorded by debiting Loss on Repossession account and crediting the
appropriate Installment Contract Receivable account for the unpaid balance at the .time of default.
All repossessions and trade-ins are recorded at realizable values. The following data relate to the
trans¬ actions during 2012 and 2013
2012 2013
Installment contract receivable, Dec. 31:
2012 sales 80,000 25,000
2013 sales , 95,000
Purchases 100,000 120,000
New merchandise inventory, Dec. 31 at cost 10,000 26,000

Installments Sales
The company auditor disclosed that the inventory taken on December 31,2013 did not include certain
merchandise received as a trade-in on December 2, 2013 for which an allowance was given. The
realizable value of the merchandise is P1,500 which was also the allowance on the trade-in. No
entry was made to record this merchandise on the books at the time it was received. In 2013, a
2012 contract was defaulted and the merchandise was repossessed. At the time of default, the
repossessed merchandise had a fair value of P2,500.
The repossessed merchandise was neither recorded nor included in the physical inventory on
December 31, 2013.
The total realized gross profit at December 31,2013 and the adjusted gain (loss) on repossession are:
Realized Gross profit Gain (Loss) on erpossession
a. P70,000 P1,100
b. P70,000 (P1,100)
c. P50,400 P1,100)
d. P50,400 (P1,100) Guerrero 2013
143. Carlos Labung Appliance Co., sold a stove, costing P 1 ,000 for P1,600 on September 2012. The
down payment was PI60, and the same amount was to be paid at the end of each succeeding
month. Interest was charged on the unpaid balance of the contract at 1/2 of 1% a month,
payments being considered as applying first to accrued interest and the balance to principal.
After paying a total of P640, the customer defaulted. The stove was repossessed in February
2013. It was estimated that the stove had a value of P560 on a depreciated cost basis.
The realized gross profit and the gain (loss) on repossession on December 31, 2013 are:
a. P232.76 and (P52.07)
b. P240.00 and (P52.07)
c. P232.76 and (P40.00)
d. P240.00 and (P40.00) Guerrero 2013
144. Standard Sales Corporation accounts for sales on the installment basis. The balances of the
control accounts for Installment Contracts Receivable at the beginning and end of 2013 were:
Jan. 1, 2013 Dec. 31, 2013
Installment contract receivable - 2011 P 24,020
Installment contract receivable - 2012 344,460 P 67,440
Installment contract receivable - 2013 410,090
During 2013, the company repossessed a refrigerator which had been sold in 2012 for P5,400 and
P3,200 had been collected prior to default. The company sales and cost of sales figures are
summarized below:

ADVANCED ACCOUNTING
2011 2012 2013

Net Sales P380,000 P432,000 P602,000
Cost of Sales 247,000 285,120 379,260
The resale price of the repossessed merchandise is P2,000 after reconditioning cost of P300 and
a normal gross profit of 35%. The total realized gross profit on December 31,2013 and the gain
(loss) on repossession are:
a. P172,892.50 and P(381)
b. P172,852.50 and P(452)
c. P142,500.00 and (P(452)
d. P142,500.00 and (P 452 Guerrero 2013
145. The data below are taken from the records of Jess Appliance Co., which sells appliances
exclusively on the installment basis.
2011 2012 2013
Installment Sales P365,500 P417,800 P610,750
Gross Profit Rate 36% 39% 40%
The balance in the Installment Accounts Receivable controlling accounts at the beginning and
end of 2013 were:
2013
From Sales Made In: January 1 December 31
2011 P 17,400 P -
2012 205,400 25,800
2013 - 305,520
There was one repossession recorded during 2013, it related to a 2012 sale. The repossessed
appliance was sold at its fair value of P200, which equaled the uncollected balance in the customer's
installment accounts receivable. The total realized gross profit on prior year sales on December 31,
2013 and the gain (loss) from the sale of the repossessed appliance are:
a. P76,230 and P(78)
b. P76,230 and P78
c. P69,966 and P78
d. P75,230 and P78 Guerrero 2013
146. The following accounts appeared in the accounting records of Adidas Sales Company as of
December 31, 2013:
Installment accounts receivable-2012 P15,000 Repossessions P3,000
Installment accounts receivable – 2013 200,000 Installment sales 425,000
Inventory, December 31,201 270,000 Regular sales 385,000
Purchases 555,000 Deferred gross profit-2012 54,000

Installments Sales
Installment accounts receivable - 2012, January 1,2013 P120,000
Inventory of new and repossessed merchandise, December 31,2013 95,000
Gross profit rate on regular sales 30%
Repossession was made during the year, 2013. It was a 2012 sale and the corresponding
uncollected balance at the time of repossession was P7,200.
Compute (1) the total realized gross profit for 2013 and the (2) loss on repossession:
a. (1) P129,510; and (2) P 960
b. (1) P129,510; and (2) P1,464
c. (1) P245,000; and (2) P960
d. (1) P 85,500; and (2) P1,464 Guerrero 2013
Sales, COGS & Cash Collection

147. The following selected accounts are taken from the trial balance on December 31,2012 of
Cebu Company:
Accounts receivable-charge sales P75,000

Installment receivables-2010 15,000
Installment receivables - 2011 45,000
Installment receivables – 2012 270,000
Merchandise inventory 52,500
Purchases 390,000
Freight-in 3,000
Repossessed merchandise 15,000
Repossession loss 24,000
Cash sales P90,000
Charge sales 180,000

ADVANCED ACCOUNTING
a. Gross profit rate on 2010 installment sales was 30% and for 2011, the rate was 32%.
b. Installment sales prices exceed cash sales prices by 24% while charge sales prices
exceed cash sales prices by 20%.
c. The entry for repossessed goods was:
Repossessed merchandise P15,000
Repossession loss 24,000
Installment receivables - 2010 P18,000
Installment receivables - 2011 21,000
d. Merchandise on hand at the end of 2012 (new and repossessed was P70,500.
(1) If all sales were on cash basis, the total sales for 2012, and (2) The cost of goods sold on
installment sales for 2012:
a. (1) P600,000; (2) P272,160 c. (1) P516,328; (2) P390,000
b. (1) 600,000; (2) 234,000 d. (1) 800,000; (2) 267,624
148. Using the same information in Number 147, The cash collections on Installment Sales for -
2010 2011 2012
a. P89,000 P168,000 P176,400
b. 74,000 123,000 176,400
c. 41,000 57,000 176,400
d. 33,000 66,000 176,400
Comprehensive
149. The Precious Appliance Company started business on January 1, 2011. Separate accounts
were established for installment and cash sales.
On installment sales, the contract price is 106% of the cash sale price. A standard installment
contract is used whereby a down payment of 1/4 of the installment price is required, with the
balance payable in 15 equal monthly installments. The interest charged per month is 1 % of
the unpaid cash sales price equivalent. It is recognized in the period earned.
Installments receivable and installment sales are recorded at the contract price. When
contracts are defaulted, the unpaid balances are charged to Bad Debt Expense. Sales of
defaulted merchandise are credited to Bad Debt Expense.

Installments Sales
The following data show the results of transactions in 2011:
Sales:
Cash sales P126,000
Repossessed sales 230
Merchandise inventory, January 1, 2011 58,060
Purchases 209,300
Merchandise inventory, December 31, 2011:
Repossessed inventory 180
Cash collections on installment contracts:
Down payments 66,250
Subsequent installments including interest of P9,252.84
(average of six monthly installments on all contracts,
except on defaulted contracts) 79,341
Five contracts totalling P1,060 were defaulted after 3 monthly installment payments.
The gross profit percentage in 2011 based on cash sales price equivalent is:
a. 35% c. 37.75%
b. 45% d. 37.00%
150. Using the same information in No. 150, the total interest earned on a P1,060 installment sale
contract for the first four months is:
a. P20.67 c. P39.15
b. 37.16 d. 159.00
151. Using the same information in No. 150, compute the (1) net gain or (loss) on defaulted
contracts during 201, and (2) the realized gross profit for 2008:
a. (1) P 38.57 ; (2) P99,084.86 c. (1) P 38.57 ; (2) P99,024.86
b. (1) P(38.57); (2) P99,024.86 d. (1) P(38.57); (2) P99,084.86

ADVANCED ACCOUNTING

152. The trial balance of Dumaguete Appliance Corporation as of the end of the fiscal year on
September 30, 2012 is:
Debit Credit
Accounts receivable P100,000
Accounts payable P100,000
Allowance for depreciation 33,750
Capital stock 125,000
Cash 46,250
Equipment 112,500
Inventory, Sept. 30, 2011 62,500
Prepaid expenses 3,750
Purchases 435,000
Repossessions 2,500
Retained earnings 30,000
Sales 312,500
Selling and administrative expenses 97,500
Total P1,026,250 P1,026,250
The post-closing trial balance on Sept. 30,2011 shows the following balances of certain
accounts:
The gross profit percentage on regular sales during the year was 30%.
The accountant made the following entry for a repossession on a sale of 2011 towards the
end of fiscal year:
Repossessions P2,500
Installment contract receivable - 2011 . P6,250
The inventory of new and repossessed merchandise on Sept. 30, 2012 amounted to P75,000.
The total realized gross profit for the fiscal year September 30, 2012:
a. P141,875 c. P 93,750
b. 101,250 d. 235,625

Installments Sales
153. Using, the same, information in Number 152, the correcting entry for repossession made on a
sale of 2011 is:
a. Deferred gross profit-2011 3,125
Loss on repossession 3,125
b. Deferred gross profit - 2011 3,750
Loss on repossession 3,750
c. Loss on repossession 3,125
Installment contract rec'ble-2011 3,125
d. No entry necessary
154. Using the same information in Number 152, compute the net income for the fiscal year
September 30,2012:
a. P235,000 c. P235,625
b. 138,125 d. 137,500
COMPREHENSIVE
Instalment Method vs Cost Recovery
Items 53 through 58 are based on the following information: Dayag 2013
Pampanga Industrial sells machinery on the installment plan. On September 1, 2011,
Pampanga entered into an installment sale contract with GMA Productions for a six-year
period. Equal annual payments under the installment sale are P187,500 and are due on August
31 of each year beginning in 2012.
(a) The cost of the machinery sold to GMA was P637,500.
(b) The implicit interest rate on the installment sale is 10%.
Pampanga Industrial uses calendar year as a result of the above transaction and use effective-
interest rate method of amortizing any discount.
The present value factors at 10% for six periods are as follows;
Year PV of P1 PV of an annuity of P1
1 .9091 .9091
2 .8264 1.7355
3 .7513 2.4869
4 .6830 3.1699
5 .6209 3.7908
6 .5645 4.3553
155. Assuming that circumstances are such that the collection of the installments due under the
contract is reasonably assured, compute the realized gross profit on installment sales for
2011 (rounded):
a. Zero c. P179,119
b. P81,250 d. 487,500

ADVANCED ACCOUNTING
156. Using the same information in No. 155, compute the total income for 2011 (rounded):
a. P27,221 c. P206,340
b. 108,471 d. 541,721
a. P71,221 c. P206,340
b. 108,471 d. 257,433
158. Assuming that circumstances are such that the collection of the installments due under the
contract cannot be reasonably assured, compute the realized gross profit on installment sales
for 2011 (rounded):
a. Zero c. P179,119
b. P81,250 d. 487,500
159. Using the ame information in No. 156, compute the total income for 2011 (rounded):
a. P27,221 c. P206,340
b. 108,471 d. 541,720
a. P78,134 c. P102,194
b. 101,418 d. 119,384
161. Coaster manufactures and sells logging equipment. Due to the nature of its business,
Coaster is unable to reliably predict bad debts. During 2011, Coaster sold equipment costing
P2,400,000 for P3,600,000. The terms of the sale were 20% down, with equal payments due
quarterly over the next 3 years. All payments for 2011 were made on schedule. Round
answers to two places.
Assuming that Coaster uses the installment method of accounting for its installment sales, what
amount of realized gross profit will Coaster report in its income statement for the year ended
December 31, 2011 ?
a. P1,680,000 c. P560,000
b. P1,120,000 d. P369,600 Dayag 2013
162. Assuming the same information in No. 51 and that Coaster uses the cost-recovery method of
accounting for its installment sales, what amount of realized gross profit will Coaster report in
its income statement for the year ended December31,2012?
a. P -0- c. P316,800
b. P240,000 d. P960,000 Dayag 2013

Installments Sales
Instalment Method vs Cost Recovery Method vs Point of Delivery Method

163. On June 1, 2011, the Foster Company sold inventory to the Ushman Corporation for
P400,000. Terms of the sale called for a down payment of P100,000 and four annual
installments of P75,000 due on each June 1 beginning June 1, 2012. Each installment also
include interest on the unpaid balance applying an appropriate interest rate. The inventory
cost Foster P150,000. The company uses the perpetual inventory system. Compute the
amount of gross profit to be recognized in 2011. (Ignore interest charges).
Point-of-Delivery Installment Cost
Method Method Recovery Method
a. P250,000 P62,500 P250,000
b. -0- 250,000 62,500
c. 62,500 250,000 -0-
d. 250,000 62,500 -0- Dayag 2013

Practical Accounting 2: Theory & Practice Advanced Accounting Installment Sales

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PRACTICAL ACCOUNTING 2

THEORY & PRACTICE

Revenue Recognition -Installment Sales

II. Installment Sales

A. Determining Gross Profit Rates:

For Current Year:

B. Recognition of Gross Profit Under Installment Sales Method

Installments Sales - Lecture Page 3

of the current year (Installment Sales -

Determining Deferred Gross Profit, End of the Year:

Installment Accounts Receivable, end of the

Determining gain or loss on repossession:

Estimated Resale Price after Reconditioning

Fair market value/True worth of Repossessed

Installments Sales - Lecture Page 4

Trade-in allowance Pxxx

Under exceptional circumstances, however, the cost recovery may be used.

Note to the Examinees:

Installments Sales - Lecture Page 5

2. The installment method of recognizing profit for accounting purposes is acceptable if

3. Under the installment sales method,

Installments Sales – MCQ Theory Page 6

Installments Sales – MCQ Theory Page 7

Installments Sales – MCQ Problems Page 8

Installments Sales – MCQ Problems Page 9

The installment sales in 2012:

INSTALMENT SALES METHOD

Installments Sales – MCQ Problems Page 10

Instalment Accounts Receivable

Sales 1,000,000 2,000,000

Installments Sales – MCQ Problems Page 11

Rate of gross profit on installment

Installments Sales – MCQ Problems Page 12

Deferred Gross Profit

Installment sales 1,000,000

Installments Sales – MCQ Problems Page 13

Installment sales 400,000

Installment sales 800,000

Installment accounts receivable, 12/31 /09 200,000

Installments Sales – MCQ Problems Page 14

Cost of installment sales 500,000

Installments Sales – MCQ Problems Page 15

At December 31, 2009, Rex had deferred gross profit of

Installments Sales – MCQ Problems Page 16

Installments Sales – MCQ Problems Page 17

Installments Sales – MCQ Problems Page 18

Realized Gross Profit

Installments Sales – MCQ Problems Page 19

Installment accounts receivable, 1/1/09 755,000

Installment accounts receivable, 12/31/09 500,000

Installments Sales – MCQ Problems Page 20

Installments Sales – MCQ Problems Page 21

The realized gross profit for 2012 is

Installments Sales – MCQ Problems Page 22

The realized gross profit for 2013 is:

Installments Sales – MCQ Problems Page 23

Installments Sales – MCQ Problems Page 24

Year 1 & Year 2

Questions 1 & 2 are based on the following: Punzalan 2014

Installments Sales – MCQ Problems Page 25

Total Gross Profit Realized

Mark-up on cost Sales

Installments Sales – MCQ Problems Page 26