AFAR 2 - INSTALLMENT SALES

S Company, its engaged in buying and selling office equipment. On August 1, 2021, 10 new
laptops with a total cost of 200,213 was sold to T Company at 37,500 each. Terms: 25% down
payment, balance in twelve equal monthly installments. The company accepted slightly used
personal computers given by T Company in lieu of the down payment. Per estimate, these
computers can command a total selling price of 125,000 after reconditioning them at a cost of
17,500. The company allows normal profit margin of 2.5% for the sale of used equipment.

1. What is the correct entry to be made on August 1, 2021?

2. What is the realized gross profit in 2021?

Z Company uses the installment method in recognizing gross profit. The following information
relate to its operations from 2015 to 2017.

2015 2016 2017

Installment Sales P1,020,000 P1,500,000 P(7)
Cost of Installment Sales (1) (5) 1,540,000
Gross Profit (2) (6) 660,000
Gross Profit % (3) 25% (8)
Cash Collections
2015 Sales (4) 400,000 120,000
2016 Sales 800,000 450,000
2017 Sales 1,100,000
Realized Gross Profit P187,500 350,000 (9)

1. What is the gross profit rate in 2015 and the total realized gross profit in
2017?