For Questions 1 to 3

PP and Co., which began business on Jan. 1, 2021 uses installment sales method.
The following data are available for 2021:

Cash Collections during the year 150,000.00

Deferred Gross Profit, (after adjustment) 140,000.00
Gross Profit Rate Based on Sales 40%

1. How much is the ending balance of Installment Receivable as of Dec 31, 2021?
a. 200,000.00 c. 500,000.00
b. 350,000.00 d. none of the above

2. How much is the Installment Sales for the year 2021?

a. 200,000.00 c. 500,000.00
b. 350,000.00 d. none of the above

3. How much is the Total Gross Profit for this sale?

a. 80,000.00 c. 200,000.00
b. 140,000.00 d. 350,000.00

For Questions 4 to 6
Below data pertains to installment sales of Par T Al Co:

- Down Payment: 20%

- Installment Sales: Php545,000 in 2019; Php785,000 in 2020; Php968,000 in 2021
- Mark up on cost: 35%
- Collections after down payment: 40% in the year of sale, 35% in the year after
sales, and 25% in the third year (based on the remaining balance)

4. How much is the Total Deferred Gross Profit-adjusted in 2021?

a. 464,640.00 c. 120,806.00
b. 161,626.00 d. none of the above

5. How much is the Realized Gross Profit for the year 2021?
a. 291,256.00 c. 216,362.00
b. 161,626.00 d. none of the above

6. How much is the Total Installment A/R on 2021?

a. 621,640.00 c. 157,000.00
b. 464,640.00 d. none of the above

7. According to the cost recovery method of accounting, gross profit on an

installment sale is recognized as income:

a. After cash collections equal to the cost of sales have been received
b. In proportion to the cash collections
c. On the date the final cash collection is received
d. On the date of sale

8. When there is doubt about eventual collectibility in an installment sale, the

income recognition method least likely to overstate income is:
a. Gross Profit Realization Method
b. Cost Recovery Method
c. Installment Sale Method
d. Any of the above

For Questions 9 to 10
Revyn Yu Co. which began operations on Jan. 1, 2020, uses installment
method of accounting. The following information pertains to Revyn Yu Co's
operation for the year:

Installment Sales 500,000.00

Regular Sales 350,000.00
Cost of Installment Sales 300,000.00
Cost of Regular Sales 200,000.00
General and Administrative Expense 60,000.00
Collection on Installment Sales 300,000.00

9. How much is the Realized Gross Profit for the year?

a. 120,000.00 c. 270,000.00
b. 450,000.00 d. none of the above

10. How much is the Net Income for the year?

a. 260,000.00 c. 270,000.00
b. 210,000.00 d. none of the above
 Deferred Gross Profit, (after adjustment) 140,000.00
Gross Profit Rate Based on Sales 40.00%
1. B Ending Installment A/R 350,000.00
Add: Cash Collections 150,000.00
2. C Installment Sales 500,000.00

3. C Installment Sales 500,000.00

Gross Profit Rate Based on Sales 40.00%
Total Gross Profit 200,000.00

Schedule of Payments till Yr 2021

Yr 2019 Yr 2020 Yr 2021 Total

Sales 545,000.00 785,000.00 968,000.00 2,298,000.00
DP 109,000.00 157,000.00 193,600.00 459,600.00
Unpaid Balance 436,000.00 628,000.00 774,400.00 1,838,400.00
1st Collection 174,400.00 251,200.00 309,760.00 735,360.00
2nd Collection 152,600.00 219,800.00 - 372,400.00
3rd Collection 109,000.00 - - 109,000.00
6. A A/R for the year 2021 - 157,000.00 464,640.00 621,640.00
GPR based on Sales 0.26 0.26 0.26 0.26
4. B Deferred Gross Profit - adj - 40,820.00 120,806.40 161,626.40

Total Collections during 2021 109,000.00 219,800.00 503,360.00 832,160.00

GPR 0.26 0.26 0.26 0.26
5. C Realized Gross Profit 28,340.00 57,148.00 130,873.60 216,361.60

7. A

8. B
 Regular
Regular Sales 350,000.00
Regular COS 200,000.00
RGP from Regular Sales 150,000.00
Add: RPG from Installment Sales
Collections on Installment Sales 300,000.00
GPR on Installment Sales 0.40 120,000.00
9. C Total Realized Gross Profit 270,000.00
Less: General and Administrative Exp 60,000.00
10. B Net Income 210,000.00
135
100
35 0.26