BM2012

NAME: SECTION: SCORE:

PRACTICE EXERCISE
Portia Co. uses the installment method of income recognition. The entity provided the following pertinent data:
20x1 20x2 20x3
Installment sales P600,000 P750,000 P720,000
Cost of goods sold 450,000 570,000 504,000

Balance of deferred gross profit at year-end

20x1 105,000 30,000 -
20x2 108,000 18,000
20x3 144,000
REQUIRED:
1. Total balance of Installment Receivable on December 31, 20x3 ____________

Reginald Company, which began operations on January 5, 20x1, appropriately uses the install method of
revenue recognition. The following information pertains to the operations for 20x1 and 20x2:
20x1 20x2
Sales P600,000 P900,000
Collections from:
20x1 sales 200,000 100,000
20x2 sales 300,000
Accounts written off from:
20x1 sales 50,000 150,000
20x2 sales 300,000
Gross profit rates 30% 40%
REQUIRED:
2. Deferred gross profit on December 31, 20x2 ______________
3. Realized gross profit in 20x2 ______________

The following are the information related to instalment sales made by Bimbo Co.:
20X1 20X2
Sales P200,000 P320,000
Cost of Sales 160,000 224,000
Gross profit rate 20% 30%
Installment receivable, 20x1 90,000 30,000
Installment receivable, 20x2 144,000
During 20x2, Bimbo Co. has repossessed a property sold to a defaulted customer in 20x1 for P25,000. Prior
to repossession, P5,000 were collected from the buyer. The repossessed property has an estimated resale
price of P22,000. Reconditioning costs amount to P3,000. The normal profit margin is 30%.

REQUIRED:
4. Compute the gain or loss on repossession ____________
5. Compute the total realized gross profit in 20x2 ____________
6. Net income recognized in 20x2 ____________

Performance Indicators Points

Correct accounts and amounts used 3
Computed final amounts are correct/balanced 2
Total 5

09 Activity 1 *Property of STI

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