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On August 6, 2019, D Company, sold a 3 in 1 heavy duty copier costing 220,000 for 295,000 to
E Company. Terms: 20% down, balance in twelve equal monthly installment every end of the
month commencing on the month of sale. The company uses perpetual inventory system.
1. What are the amounts of (1) realized gross profit and (2) deferred gross
profit for/ as of December 31, 2019?
2. What is the ratio deferred gross profit to installment accounts receivable as of
December 31, 2019?
Assuming that due to the global financial crisis that devastated the hotel and tourism sector, E
Company suffered liquidity problem. The company was able to pay its account up to January,
2020 only. On March 15, 2020, the copier was subsequently repossessed. The repossessed
equipment could still be sold for 95,000 after “reconditioning” and repainting its body at a total
cost of 7,500. A two and a half percent sales commission is normally allowed for the sale of
second hand copier.
In 2021, installment sales of C Company amounted to 22,500,000 with the cost of sales at
12,375,000 and regular sales of 6,200,000 which was sold at 25% above cost. The following
are some of the account balances appearing in the general ledger of the company.
2021
January 1 December 1
4. What are the gross profit rates from installment sales in (1) 2019, (2) 2020
and (3) 2021?
5. What is the total realized gross profit in 2021?