4.

Collections:
In kind (trade-in) P 24,600
In cash (down payment) 30,000
Total P 54,600

Realized gross profit (54,600 X 40%) = P 21,840

Problem 3

A.

1. Gross profit rate = Deferred gross profit/Installment sales

Gross profit rate = 400,000 / 1,000,000
Gross profit rate = 0.4 or 40%

2. PV = Present value of annuity of 1 for 24 periods at 3%

PV = [ 1 – (1+.03) -24]
.03
PV = 16.935542

Monthly amortization = Unpaid balance = P 800,000 = P 47,237.93

PV of Annuity of 1 16.935542
for 24 periods discounted

Applied to Balance of
Date Collections Interest Principal Principal
October 1 P 1,000,000
Down payment P 200,000 P 200,000 800,000
November 1 47,237.93 P 24,000.00 23,237.93 776,762.07
December 1 47,237.93 23,302.86 23,935.07 752,827.00
TOTAL P 294,475.86 47,302.86 247,173.00

Realized gross profit (247,173 X 40%) = P 98,869.20

B. Journal and adjusting entries

2008
October 1 Cash 200,000
Notes Receivable 800,000
Land 600,000
Deferred Gross Profit 400,000