PROBLEM 9-7

Fortune Sales
Corporation

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Installment Sales
Purchases

P2,210,000
P1,701,800

Inventory,end (Jan.1,2013)
COGS
Gross Profit

(420,000)

(1,281,800)
P928,200

Rate (928,200 / 2,210,000) = 42%

Repossession (refer to addtl infos C & D)

Selling Price
2012
2013
44,000

P195,000 x 20% = 39,000

P110,000 x40% =

Trade-in
to addtl info E)
Total (refer
Repossession

P83,000

*since FMV is already given @ P158,000

Trade-in Allowance = 226,000 158,00

Over allowance

= P68,000

2013:
Installment Sales

P3,100,000

Over allowance (Trade-in)

(68,000)

Installment Sales adjusted

3,032,000

Inventory, beg
Purchases
Repossession

P420,000
1,767,000
83,000

Inventory, end (358,820+46,500)

COGS
Gross Profit

(405,320)

(1,864,680)
P1,167,320

Rate (1,167,320 / 3,032,000) = 38.5%

Gross Profit on Installment Sales

Installment Contracts Rec.
2012

GP rate

P400,000

x 42%

= P168,000

2012 Sale P173,000

x 42%

= P72,660

2013 Sale P560,000

x 38.5%

2013

P288,260

= P215,600

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Uncollectible installment
contracts expense, books
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P 99

Correct uncollectible
contracts expense
FMV of repossessed merchandise

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FMV of repossessed merchandise

2012 sales
(195 000 x 20%)
2013 sales
(110 000 x 40%)

P 39 000
P 44 000

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Uncollectible installment
contracts expense, books
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P 99

Correct uncollectible
contracts expense
FMV of repossessed merchandise
2012 sales
P 39 000
2013 sales
44 000
83 000
Unrecovered cost

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Unrecovered Cost
2012 sales
(105 000 x 58%)
2013 sales
(82 000 x 61.5%)

P 60 900
P 50 430

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Uncollectible installment
contracts expense, books
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P 99

Correct uncollectible
contracts expense
FMV of repossessed merchandise
2012 sales
P 39 000
2013 sales
44 000
83 000
Unrecovered cost
2012 sales
60 900
2013 sales
50 430
(111 330)
Adjustment

P 70 670

STATEMENT OF
COMPREHENSIVE
INCOME

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Schedule 1

Installment contracts receivable 2013, December 31

P560,000
Installment contracts receivable 2013 defaulted
___82,000
Total
P642,000
Multiply by 2013 gross proft percentage

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Schedule 2

Installment contracts receivable 2012, January 1

P
Less Installment contracts receivable 2012, December 31
Total credits for the period
2
Less Installment contracts receivable 2012 defaulted
Total collections
P
Multiply by 2012 gross proft percentage
_____
Realized gross proft on 2012 installment sales
P

Fortune Sales Corporation

Statement of Comprehensive Income
For the year ended December 31, 2013
Cash Sales

Installment
Sales

Total
Sales

Sales

205 000

3 032 000

3 237 000

Cost of Sales

158 000

1 864 680

2 022 680

Gross Proft

47 000

1 167 320

1 214 320

Less Unrealized GP on 2013

Installment Sales

247 170

247 170

Realized GP on 2013 sales

920 150

967 150

Add Realized GP on 2012 installment

Sales

51 240

51 240

Total Realized GP

971 390

1 018 390

Less Uncollectible Installment

Contact expense

28 330

28 330

Total realized GP after adjustment

943 060

990 060

Operating Expenses

592 960

Net Income

397 100