Académique Documents
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155
CHAPTER 9
MULTIPLE CHOICE ANSWERS AND SOLUTIONS
9-1:
d
Deferred gross profit, Dec. 31 (before adjustment)
Less: Deferred gross profit, Dec. 31 (after adjustment)
Installment accounts receivable, Dec. 31
Gross profit rate
P1,050,000
P1,500,000
____ 25%
__375,000
P 675,000
OR
Installment Sales (P1,050,000 25%)
Less: Installment account receivable, Dec. 31
Collection
Gross profit rate
Realized gross profit, 2008
9-2:
9-3:
P4,200,000
__1,500,00
P2,700,000
___X 25%
P 675,000
a
2009
P7,230
2010
P 60,750
2,100
20,295
P5,130
P 40,455
P1,010,000
___440,000
P1,450,000
b
Sales
Cost of installment sales
Deferred gross profit
Less: Deferred gross profit, end
Installment accounts receivables, 12/31
(1,000,000-400,000)
Gross profit rate (300,000 1,000,000)
P1,000,000
__700,000
P 300,000
P 600,000
___X 30%
9-6:
__180,000
P 120,000
___80,000
40,000
__100,000
P 140,000
156
9-5:
___58,500
P 61,650
P 202,000
9-4:
2011
P 120,150
Chapter 9
a
Market value of repossessed merchandise
(before reconditioning cost)
Less: unrecovered cost
Unpaid balance (80,000-30,000)
Less: Deferred gross profit (50,000X20%)
Loss on repossession
P 30,000
P 50,000
___10,000
__40,000
(P 10,000)
a
Installment sales
Less: collection on installment sales
Installment account receivables, 12/31/08
Gross profit rate (500,000 1,000,000)
P1,000,000
__200,000
800,000
___X 50%
P 400,000
OR
P500,000
_100,000
P400,000
9-7:
9-8:
d
Fair value of repossessed merchandise
Less: unrecovered cost
Unpaid balance
Less: Deferred gross profit (200,000 X 32.5%)
Loss on repossession
P120,000
P 200,000
___65,000
_135,000
(P 15,000)
b
Realized gross profit:
Collections:
Downpayment
Installment received (205,000-200,000)
Total
Gross Profit Rate (150,000 240,000)
P 35,000
___5,000
40,000
_X 62.5%
P 25,000
P165,000
P 200,000
__125,000
__75,000
P 90,000
Installment Sales
9-9:
b
Sch.1
Date
Apr-1
Apr-1
May-1
Jun-1
Jul-1
Aug-1
9-10:
157
Collection
750
625
625
625
625
Applying
to
Interest
Applying
to
principal
125.00
115.00
104.80
__94.40
P439.20
750.00
500.00
510.00
520.20
___530.60
P2,810.80
Balance
of
principal
P7,000.00
6,250.00
5,750.00
5,240.00
4,719.80
4,189.00
P 1,875
P 4,189
__1,466
___2,723
(P 848)
P2,810.80
__X 35%
P 983.78
Year of Sales
2010
2011
Deferred gross profit (Sales X Gross Profit Rate)
2010
(P300,000 X 30%)
2011
(P450,000 X 40%)
2010: Accounts written-off (P25,000 X 30%)
Realized gross profit (P100,000 X 30%)
2011: Accounts written-off, 2010 (P75,000 X 30%)
Accounts written-off, 2011 (P50,000 X 40%)
Realized gross profit, 2010 (P50,000 X 30%)
Realized gross profit, 2011 (P150,000 X 40%)
Deferred gross profit, 12/31/011 (P75,000)
9-11:
a
Deferred gross profit, 2010 (P1,050,000 - 735,000)
Realized gross profit, 2010 (P150,000 X 30%)
Deferred gross profit, 12/31/010
Realized gross profit, 2011 (P390,000-90,000) X 30%
Deferred gross profit, 12/31/011
P 90,000
P 180,000
( 7,500)
( 30,000)
( 22,500)
( 60,000)
( 15,000)
________
P 15,000
( 60,000)
P 60,000
P 315,000
( 45,000)
270,000
( 90,000)
P 180,000
158
9-12:
Chapter 9
b
2010
2011
P 480,000
P450,000
( 252,000)
( 180,000)
(9,600)
_______
( 270,000)
P 38,400
P180,000
P 30,000
P 25,000
P 1,250
__3,750
___5,000
__20,000
P 10,000
P 5,000
20,000
_15,000
P 40,000
P 85,000
( 10,000)
P 75,000
_60,000
P 15,000
_X 20%
P 8,000
9-14: c
Collection excluding interest (P900,000-P300,000)
Gross profit rate (P1,200,000 P3,600,000)
P 600,000
X 33 1/3%
200,000
__300,000
P 500,000
9-15: a
Wholesale value of repossessed merchandise
Less: unrecovered cost
Unpaid balance:
Sales, 10/1/010
Collection, 2010 (6,000 2,000)
Collection, 2011 (1,000 X 7)
Deferred gross profit (9,000 X 25%)
Loss on repossession
P
P 24,000
( 8,000)
( 7,000)
P 9,000
__2,250
___6,750
(P 2,750)
Installment Sales
9-16:
9-17:
9-18:
a
Trade-in Value (P300 X 6)
Less: Actual value
Estimated selling price (P315 X 6)
Less: Reconditioning cost (P25 X 6)
Gross Profit (P1,890 X 10%)
Over-allowance
a
Deferred gross profit, before adjustment
Deferred gross profit, end
2010: P32,500 X (30% 130%)
2011: P180,000 X (33 1/3% 133 1/3%)
4,000
159
P 1,800
P 1,890
P150
_189
___339
___1,551
P
249
P 76,000
P 7,500
_45,000
__52,500
P 23,500
d
Unpaid balance (P27,000 - P16,000)
Multiply by gross profit rate (P734,400 P2,160,000)
P 11,000
___X 34%
3,740
9-19:
b
Collection:
2010
Downpayment
2011
Installment collection
Interest
Total
P 600,000
600,000
__540,000
P1,740,000
Cost to be recovered
P4,000,000
Since cost is not yet fully recovered, then no gross profit is to be recognized in 2011.
9-20:
d
Regular Sales
Cost of regular sales
Gross profit on regular sales
Add: Realized gross profit on installment sales
2010 (25,000 X 50%)
2011 (62,500 X 55%)
Total realized gross profit
Operating expenses
Net income, 12/31/011
160
9-21:
P 187,500
__112,500
P 75,000
P12,500
_34,375
__46,875
121,875
___31,250
P 90,625
Chapter 9
a
Installment sales 2010
P785,000
Collections:
Down payment (20% x 785,000)
P157,000
Installment (40% x 628,000)
251,200
408,200
Installment accounts receivable 2010, 12/31/010
376,800
Gross profit rate on sales
35/135
Deferred gross profit- 2010, 12/31/010
P 97,689
9-22:
a
Regular sales
P1,575,000
Cost of regular sales
1,050,000
Gross profit on regular sales
525,000
Realized gross profit on installment sales:
Installment sales (1,093,750 x 240%)
2,625,000
Installment accounts receivable-12/31/011 1,575,000
Collections
1,050,000
Gross profit on rate on sales
140/240
612,500
Total realized gross profit
1,137,500
Operating expenses (1,137,500 x 70%)
796,250
12/31/011
P 341,250
9-23:
9-24:
a
Regular sales
P375,000
Cost of regular sales
215,000
Gross profit on regular sales
160,000
Realized gross profit on installment sales:
Collections excluding Interest (312,000 24,000)288,000
Gross profit rate (270,000/900,000)
30%
86,400
Total realized gross profit
246,400
Loss on repossession
Fair value of repossessed merchandise
54,000
Less: Unrecovered cost (100,000 x 70%)
70,000
( 16,000)
Total realized GP after loss on repossession
230,400
Less: Operating expenses
72,000
Installment accounts written-off (44,000 x .70)
30,800
102,800
Net operating income
127,600
Interest income
24,000
Net income
P151,600
1.
a
Fair value of repossessed air conditioners (5 x P4,000)
Less unrecovered cost (P25,600 x 65%)
Loss on repossession
P20,000
16,640
P 3,360
Net income,
Installment Sales
161
9-24, continued:
2.
a
Sales price (P100,000 x 90%)
Add underallowance (P12,000 P10,000)
Adjusted sales value
Less cost of sales
Gross profit
9-25:
P90,000
2,000
P92,000
59,800
P32,200
Sales price
Less fair value of merchandise traded in
Balance
P80,000
P12,000
16,000
38,400
P66,400
35%
P23,240
1.
P90,000
10,000
Sales price
Add underallowance on trade in (P97,500 P80,000)
Adjusted sales price
Cost of sales
Gross profit
Gross profit rate (P216,875 / P867,500)
P850,000
17,500
867,500
650,625
P216,875
25%
Sales price
Less trade in value of merchandise traded in
Balance
Cash downpayment (25% of P850,000)
Installment accounts receivable
P850,000
80,000
770,000
212,500
P557,500
Date
July
July
August
September
Total
Collection
Interest
income
Principal
P30,000
30,000
30,000
P5,575
5,331
5,084
P15,990
P24,425
24,669
24,916
P74,010
Balance
P557,500
533,075
508,506
483,490
P300,000
362.617.5
P(62,617.5)
162
Chapter 9
9-24, continued:
2.
P 97,500
212,500
74,010
384,010
25%
P 96,003
c
Fair value of repossessed merchandise
Loss on repossessions
Unrecovered cost
Divided by account defaulted
Cost ratio (P126,000 / P180,000)
P112,500
13,500
126,000
180,000
70%
1.
P750,000
360,000
P390,000
P128,000
P160,200
(7,660)
(32,040)
120,500
P 7,500
P517,500
414,000
P103,500
20%
Installment Sales
163
9-26, continued:
Fair value of merchandise traded in (downpayment)
P120,500
Installment collected (517,500 P120,500) / 10 x 6
238,200
Total collections
P358,700
Gross profit rate
20%
Realized gross profit Mew merchandise
P 71,740
Realized gross profit Repossessed merchandise:
Sales price
P128,750
Cost of repossessed merchandise
103,000
25,750
Total realized gross profit
P 97,490
2.
1.
2.
2009
P828,000
(617,000)
(7,200)
2010
P980,000
(578,000)
2011
P1,250,000
(425,000)
P203,800
28%
P57,064
(4,200)
P397,800
30%
P119,340
P825,000
32%
P264,000
2009
P180,000
P180,000
2010
P625,000
125,000
P500,000
2011
P900,000
650,000
P250,000
a
a
Supporting computations:
Installment accounts receivable, 1/1/011
Installment accounts receivable, 12/31/011
Collections (P930,000)
Installment accounts receivable, 1/1/011:
2009 sales
(P45,000 / 25%)
2010 sales
(P150,000 / 24%)
Installment accounts receivable, 12/31/011:
2010 sales
(P30,000 / 24%)
2011 sales
(P195,000 / 30%)
Total
P180,000
P625,000
P125,000
650,000
P775,000
164
Chapter 9
SOLUTIONS TO PROBLEMS
Problem 9 1
Journal Entries:
2009
Installment A/R2009..................... 104,000
Installment A/R2010.....................
Installment A/R2011.....................
Installment Sales......................
104,000
2010
116,000
64,480
Cash.................................................
Installment A/R2009
Installment A/R2010..............
Installment A/R2011..............
Interest Revenue.......................
66,980
57,200
9,780
125,520
116,000
11,066
29,487
Computations:
2009: P57,200 X .38
68,440
64,480
21,736
P21,736
2010:
P29,120 X .38
P71,920 X .41
Total RGP
=
=
P11,066
29,987
P40,553
2011:
P15,000 X .38
P26,680 X .41
P76,230 X .39
Total RGP
=
=
=
P 5,700
10,939
29,730
P46,369
121,000
116,000
21,736
2011
121,000
73,810
68,440
73,810
145,460
29,120
71,920
_
24,480
15,000
26,680
76,230
27,550
121,000
68,440
47,560
40,553
73,810
47,190
5,700
10,939
29,730
Installment Sales
2010:
Problem 9 2
Inventory.................................................................................................45,200
Cash.................................................................................................
Notes Receivable 2010 (P32,000 + P62,000 + 3,600)...........................97,600
Unearned Interest Revenue (P7,167 + P3,600)..............................
Installment Sales..............................................................................
Cost of Installment Sales (P45,200 P2,000 inventory increase).........43,200
Inventory..........................................................................................
Cash.......................................................................................................35,600
Notes Receivable 2010....................................................................
Unearned Interest Revenue 2010............................................................3,600
Interest Revenue..............................................................................
Installment Sales.....................................................................................86,833
Cost of Installment Sales.................................................................
Deferred Gross Profit on Installment Sales2010..........................
Deferred Gross Profit on Installment Sales2010..................................16,080*
Realized Gross Profit on Installment Sales.....................................
46,369
165
45,200
10,767
86,833
43,200
35,600
3,600
43,200
43,633
16,080
2011:
2.
P24,000
=
P60,000
40%
42%
Gross profit
=
Installment sales
P86,000
=
P200,000
Journal Entries:
Accounts Receivable......................................................................................
Sales.......................................................................................................
Installment Contracts Receivable 2011......................................................
Installment Sales.....................................................................................
Cost of Installment Sales................................................................................
Shipments on Installment Sales..............................................................
Purchases. .....................................................................................................
Cash.......................................................................................................
Selling Expenses.............................................................................................
Cash.......................................................................................................
Cash..............................................................................................................
Accounts Receivable...............................................................................
Installment Contracts Receivable 2009...............................................
Installment Contracts Receivable 2010...............................................
Installment Contracts Receivable 2011...............................................
Adjusting Entries:
Installment Sales............................................................................................
Cost of Installment Sales........................................................................
Deferred Gross Profit on Installment sales 2011................................
Deferred Gross Profit 2009 (P40,000 x 40%)............................................
Deferred Gross Profit 2010 (P80,000 x 42%)............................................
52,020
11,9552
77,545
44,020
26,000
29,500*
5,500
44,020
33,525
23,329
Chapter 9
43%
600,000
600,000
200,000
200,000
114,000
114,000
476,000
476,000
210,000
210,000
790,000
560,000
40,000
80,000
110,000
200,000
114,000
86,000
16,000
33,600
47,300
96,900
1,500
1,500
600,000
260,000
114,000
240,000
476,000
210,000
1,500
46,500
96,900
96,900
143,400
143,400
167
Sales.............................................................................................................
Cost of sales:
Merchandise inventory, January 1.......................................................... P240,000
Purchases................................................................................................
476,000
Cost of goods available for sale..............................................................
716,000
Less Shipments on installment sales.......................................................
114,000
Cost of goods available for regular sales................................................
602,000
Less Merchandise inventory, December 31............................................
260,000
Gross profit on regular sales..........................................................................
Add Realized gross profit on installment sales (Schedule 1)........................
Total realized gross profit..............................................................................
Operating expenses:
Selling expenses......................................................................................
210,000
Doubtful accounts expense.....................................................................
1,500
Net income ....................................................................................................
Schedule 1:
Years of Installment Sales
2006
2007
2008
Collections ...........................................
P40,000
P80,000
P110,000
Multiply by Gross profit rate................
40%
42%
43%
Realized gross profit.............................
P16,000
P33,600
P 47,300
4.
P600,000
342,000
258,000
96,900
354,900
211,500
P143,400
Total
P 96,900
P144,000
260,000
P 62,000
3,500
58,500
20,000
60,000
90,000
200,000
P832,500
P 60,000
8,000
25,200
38,700
131,900
P406,000
294,600
700,600
P832,500
168
Chapter 9
Problem 9 4
1.
2.
2010: GP rate =
2011: GP rate =
Gross profit
Installment sales
=
=
P21,600 + P1,200
P24,000 + P52,000
P150,000 P97,500
P150,000
Installment Sales............................................................................................
Cost of Installment Sales........................................................................
Deferred Gross Profit, 2011...................................................................
Deferred Gross profit, 2010...........................................................................
Deferred Gross Profit, 2011..........................................................................
Realized Gross Profit..............................................................................
=
=
P22,800
P76,000
30%
P52,500
P150,000
35%
150,000
97,500
52,500
14,400
25,900
40,300
Computation:
2010
Sales
P76,000
24,000
52,000
4,000
P48,000
30%
P14,400
Sales.............................................................................................................
Realized Gross Profit.....................................................................................
Loss on Repossession..............................................................................
Cost of Sales...........................................................................................
Selling and Administrative Expenses......................................................
Income Summary....................................................................................
Income Summary............................................................................................
Retained Earnings..................................................................................
3.
2011
Sales
P150,000
76,000
74,000
P 74,000
35%
P 25,900
Total
P 40,300
212,000
40,300
400
165,000
66,000
20,900
20,900
20,900
Apple Company
Statement of Comprehensive Income
Year Ended December 31, 2011
Sales................................................................................................................................
Cost of sales.......................................................................................................
Gross profit on regular sales.............................................................................................
Add Realized gross profit on installment sales (Schedule 1)............................
Total realized gross profit.................................................................................................
Less Loss on repossession.............................................................................
Total realized gross profit after adjustment for loss on repossession...............................
Selling and administrative expenses...................................................................
Net income .......................................................................................................................
Installment Sales
P212,000
165,000
47,000
40,300
87,300
400
86,900
66,000
P 20,900
169
2010
Sales
P76 000
24,000
52,000
4,000
P48,000
30%
P14,400
2011
Sales
P150,000
76,000
74,000
P 74,000
35%
P 25,900
Total
P40,300
Problem 9 5
1.
54,400
Installment Sales............................................................................................
Cost of Installment Sales........................................................................
Deferred Gross Profit, 2011...................................................................
80,000
54,400
54,400
25,600
14,000
8,000
22,000
Computation:
2010
Sales
P82,000
_ 36,000
46,000
__6,000
P40,000
__35%*
P14,000
2011
Sales
P 80,000
_55,000
25,000
___
P 25,000
___32%
P 8,000
P 22,000
=
35%
P82,000 (36,000 + 40,000 + 6,000)
170
2.
Total
Chapter 9
Sales.............................................................................................................
Merchandise Inventory, December 31...........................................................
Shipments on Installment Sales......................................................................
Merchandise Inventory, January 1.........................................................
Purchases................................................................................................
Repossessed Merchandise......................................................................
Loss on Repossession..............................................................................
Operating Expenses................................................................................
Income Summary....................................................................................
200,000
52,000
54,400
22,000
Income Summary............................................................................................
Retained Earnings..................................................................................
31,500
60,000
180,000
3,000
900
53,000
9,500
22,000
31,500
Sales..................................................................
Cost of sales:
Inventory, January 1....................................
Purchases.....................................................
Repossessed merchandise............................
Cost of goods available for sale...................
Less Shipments on installment sales...........
Cost of goods available for regular sales.....
Less Inventory, December 31......................
Gross profit.........................................................
Less Deferred gross profit on installment
sales, 2011...................................................
Realized gross profit, 2011.................................
Add Realized gross profit on 2010
installment sales...........................................
Regular
P200,000
P 60,000
180,000
__3,000
243,000
_54,400
188,600
_52,000
_136,600
P 63,400
Installment
P80,000
Total
P280,000
54,400
25,600
191,000
89,000
17,600
8,000
17,600
71,400
14,000
14,000
22,000
___900
85,400
__900
P21,100
84,500
_53,000
P31,500
Installment Sales
171
Problem 9 6
1.
London Products
Schedule of Cost of Goods Sold
Year Ended December 31, 2011
Merchandise inventory, January 1....................................................................................
Purchases .......................................................................................................................
Freight-in .......................................................................................................................
Repossessed merchandise..................................................................................
Cost of goods available for sale........................................................................................
Less Merchandise inventory, December 31.........................................................
Cost of goods sold.............................................................................................................
2.
London Products
Schedule of Allocation of Cost of Goods Sold
Year Ended December 31, 2011
Amount
P60,000
120,000
300,000
120%
125%
On Cash
Price Basis
P 60,000
100,000
240,000
Ratio to
Total
60/400
100/400
240/400
P 400,000
3.
P 48,000
238,000
12,000
14,000
312,000
52,000
P260,000
Allocated
Cost
P 39,000
65,000
156,000
P260,000
London Products
Statement of Comprehensive Income
Year Ended December 31, 2011
Sales.................................................
Cost of goods sold..............................
Gross profit........................................
Less Unrealized gross profit:
On installment contracts
receivable,12/31 (192,000 x 144/300)
Realized gross profit..........................
Add Realized gross profit on
prior years' sales (Schedule 1):
2009.....................................
19,200
2010.....................................
14,700
Total realized gross profit..................
Less Loss on repossession
(Schedule 2)................................
Total realized gross profit after
adjustment for loss on
repossession................................
Less Operating expenses....................
Net income ........................................
Installment
Charge
Total
Sales
Sales
P480,000 P 300,000
P120,000
260,000
156,000
65,000
P 220,000 P 144,000
P 55,000
92,160
127,840
92,160
51,840
33,900
161,740
33,900
85,740
10,200
10,200
151,540
93,000
P 58,540
Cash
Sales
P 60,000
39,000
P 21,000
P 75,540
172
Chapter 9
Problem 9-6, continued:
Schedule 1
2009
Installment contracts receivable, January 1:
2009 P32,000 40%............................................................................
2010 P56,000 35%............................................................................
Less Installment contracts receivable, December 31.....................................
Total credits...................................................................................................
2010
P80,000
_22,000
58,000
P160,000
__90,000
70,000
_10,000
P48,000
___40%
P19,200
28,000
P 42,000
___35%
P 14,700
2009
P 2,000
2010
P12,000
Total
P 14,000
10,000
28,000
38,000
Schedule 2
4,000
__6,000
P(4,000)
9,800
13,800
18,200
__24,200
P( 6,200)
P( 10,200)
Problem 9 7
1.
2010
2010
2010 installment sales (P400,000 x 42%*)............................................. P 168,000
2011:
2010 installment sales (P173,000 x 42%)...............................................
2011 installment sales (P560,000 x 38.5%*).......................................... ________
Deferred gross profit...................................................................................... P 168,000
2011
P 72,660
__215,600
P 288,260
2011
P3,100,000
____68,000
_3,032,000
2,270,000
Installment Sales
173
420,000
1,767,000
_83,000*
42%
358,820
____46,500
405,320
_1,864,680
P1,167,320
38.5%
P 99,000
83,000
111,330
P 70,670
28,330
Installment
Sales
P3,032,000
_1,864,680
1,167,320
Total
Sales
P3,237,000
_2,022,680
1,214,320
__247,170
920,150
__247,170
967,150
___51,240
971,390
___28,330
P 943,060
___51,240
1,018,390
___28,330
990,060
__592,960
P 397,100
174
Chapter 9
Schedule 1
Installment contracts receivable 2011, December 31...............................
Installment contracts receivable 2011 defaulted.......................................
Total........................................................................................................
Multiply by 2011 gross profit percentage.................................................
Unrealized gross profit on 2011 installment sales....................................
P 560,000
___82,000
P 642,000
___38.5%
P 247,170
Schedule 2
Installment contracts receivable 2010, January 1..........................................
Less Installment contracts receivable 2010, December 31............................
Total credits for the period.............................................................................
Less Installment contracts receivable 2010 defaulted...................................
Total collections.............................................................................................
Multiply by 2010 gross profit percentage......................................................
Realized gross profit on 2010 installment sales.............................................
1.
P 400,000
__173,000
227,000
__105,000
P 122,000
_____42%
P 51,240
P 240,000
160,000
P120,000
__80,000
__200,000
P 600,000
36,000.00
364,000.00
160,000.00
240,000.00
120,000.00
720,000.00
200,000.00
640,000.00
16,000.00
10,920.00
5,080.00
16,000.00
10,767.60
5,232.40
Installment Sales
175
72,000.00
288,000.00
240,000.00
120,000.00
December 31
Cash..........................................................................................................
Notes Receivable (Lot 1)....................................................................
Notes Receivable (Lot 2)....................................................................
Notes Receivable (Lot 3)....................................................................
Interest Income...................................................................................
78,000.00
6,240.00
5,389.37
6,800.00
59,570.63
Computation:
Total
P78,000.00
Lot 1
P12,000.00
Lot 2
P16,000.00
Collections.............................................
Apply to interest:
Lot 1 P288,000.00 x 12% x 2/12...
5,760.00
Lot 2 P353,687.60 x 12% x 3/12...59,570.63
10,610.63
Lot 3 P720,000.00 x 12% x 6/12...___________________________ _43,200.00
Apply to principal.................................. P18,429.37
P 6,240.00
P 5,389.37
2.
Lot 3
P50,000.00
P 6,800.00
153,469.06
Computation:
Lot 1
P78,240.00
Lot 3
P126,800.00
_________
60%
_________
_____76%
P26,080.00
P31,021.06
P96,368.00
33.33%
Realized gain.........................................
3.
Lot 2
P51,701.77
176
713,200.00
Chapter 9
Problem 9 9
Galaxy Investment Company
Income Statement
Year Ended December 31, 2011
Sales Schedule 1) ....................................................................................................
Cost of sales (Schedule 2)........................................................................................
Gross profit............................................................................................................
Less Sales commissions..........................................................................................
Gross profit............................................................................................................
Less Deferred gross profit
Installment Notes Balance P5,370,000
=
Installment Sales
P8,060,000
=67% x P6,227,000
P 8,060,000
1,612,000
6,448,000
221,000
6,227,000
4,172,090
2,054,910
909,000
P 1,145,910
Schedule 1
Total
Cash
Installment
A lots : 26 @ P150,000................................................
B lots : 32 @ P100,000................................................
C lots : 12 @ P80,000..................................................
.........................................................
Sales Price
P3,900,000
3,200,000
960,000
P8,060,000
Received
P1,650,000
800,000
240,000
P2,690,000
Notes Balance
P 2,250,000
2,400,000
720,000
P 5,370,000
Schedule 2
Class
A........................................................................
B........................................................................
C........................................................................
Total............................................................
Number of
Unit
Lots
Price
80
P150,000
100
100,000
120 80,000
300
Total
Sales Value
P12,000,000
10,000,000
9,600,000
P31,600,000
Cost of tract:
Cost of land....................................................................................................
Legal fees, etc................................................................................................
Grading contract.............................................................................................
Water and sewerage system contract.............................................................
Paving contract...............................................................................................
General office expenses (3/4 x P236,000).....................................................
Total.............................................................................................................
P 4,800,000
600,000
225,000
184,900
266,300
177,000
P 6,253,200
P6,253,200
Cost rate : = 20% (rounded off)
P31,600,000
Cost of sales (P8,060,000 x 20%)...........................................................................
Installment Sales
P 1,612,000
177
Problem 9 10
Rizal Company
Statement of Comprehensive Income
Year Ended December 31, 2011
Installment sales [(P14,300 x 7) + (P725 x 4)].......................................................
Cost of goods sold on installment (schedule 1).......................................................
Gross profit............................................................................................................
Less Deferred gross profit on 2011 sales
(P103,000 P21,000 = P82,000 x 23%*).....................................................
Realized gross profit on 2011 sales.........................................................................
Add Realized gross profit on prior years' sales
2009 : P60,000 x 33-1/3*...............................................................................
P20,000
2010 : P115,000 x 35%*................................................................................
_40,250
Total realized gross profit........................................................................................
Less Loss on repossession (Schedule 4)..................................................................
Total realized gross profit after adjustment.............................................................
General and administrative expenses......................................................................
Net income (loss).................................................................................................... P(18,020)
P103,000
__79,310
23,690
__18,860
4,830
__60,250
65,080
__33,100
31,980
__50,000
*See Schedule 3
Schedule 1
Purchases (P10,500 x 8)..........................................................................................
Repossessed merchandise........................................................................................
Cost of goods available for sale...............................................................................
Less Inventory, December 31
Number of units on hand................................................................................
Multiply by average unit cost (Schedule 2)...................................................
Cost of goods sold on installment...........................................................................
P 84,000
___2,520
86,520
1
P 7,210
___7,210
P 79,310
Schedule 2
Purchases during 2008 (P10,500 x 8)......................................................................
Add Repossessed merchandise................................................................................
Total ......................................................................................................................
divide by Number of units (8 + 4)...........................................................................
Average unit cost ....................................................................................................
P 84,000
___2,520
P 86,520
_____12
P 7,210
178
Chapter 9
2011
Sales
2009 :
2010 :
2011 :
P15,000 x 10.............................................
P150,000
P14,000 x 20.............................................
P14,300 x 7...............................................
P725 x 4....................................................
_______
Sales
..............................................................
150,000
Cost of goods sold:
Inventory, January 1................................................
Purchases ..............................................................
120,000
Repossessed merchandise........................................
_____
Cost of goods available for sale...............................
120,000
Less Inventory, December 31..................................
_20,000
Cost of goods sold...................................................
100,000
Gross profit......................................................................
P 50,000
Gross profit rates...............................................................33-1/3% 35%
P280,000
100,100
__2,900
103,000
_______
280,000
20,000
162,000
_____
182,000
_____
182,000
P 98,000
23%
Schedule 4
Fair market value of repossessed merchandise.......................................................
Less Unrecovered cost
Unpaid balance:
Original sales amount (P14,000 x 4)......................................................
Collections prior to repossession............................................................
Total.......................................................................................................
Less Unrealized profit (P54,800 x 35%)........................................................
Loss on repossession...............................................................................................
84,000
_2,520
86,520
_7,210
79,310
P23,690
P 2,520
P 56,000
__1,200
54,800
_19,180
_35,620
P33,100
Problem 9-11
The key to this solution is solving the gross profit rate for 2009 (3)
1.
P39,000 (P50,000 P11,000)
2.
P11,000 (P60,000 x 0.22)
3.
22%:
2010 realized gross profit on 2010 cash collections, P5,000 (P20,000 x .25)
2010 realized gross profit on 2009 cash collections, P5,500 (P10,500 P5,000)
Gross profit rate 2009, 22% (P5,500 / P25,000 cash collections)
4.
P5,000 (P1,100 / .22)
5.
P60,000 (P80,000 P20,000)
6.
P20,000 (P80,000 x .25)
7.
P120,000 (P91,000 + P28,200)
8.
23.5% (P28,200 / P120,000)
9.
P25,275:
2011 realized gross profit on 2009 collections, (P10,000 x .22)
2011 realized gross profit on 2010 collections, (P50,000 x .25)
2011 realized gross profit on 2011 collections, (P45,000 x .235)
Installment Sales
179
Problem 9-12
Installment sales
Cost of installment sales
Gross profit rates
Cash collections:
2009 sales
2010 sales
2011 sales
Realized gross profit
2009
P92,000
58,880 (b)
36%
27,200
0 (e)
2010
P103,000
62,830
39% (c)
48,300
36,600
16,620 (f)
2011
P115,000 (a)
74,750
35%
12,200
33,280 (d)
43,450
19,250 (g)
Computations:
(a)
P74,750 / .66 = P115,000
(b)
P92,000 x .64 =
P58,880
(c)
1 - (P62,830 / P103,000) = 39%
(d)
P19,250
(12,200)
0
P 7,050
P62,830
36,660
26,230
P33,280
(f)
(g)
P75,500
58,880
P16,620
P12,200
P69,880
62,830
7,050
P19,250
Problem 9-13
1.
Repossessed Inventory
2010 repossessi0ns (P37,500 x 20%)
2011 repossessions (P24,000 x 50%)
Trade-In inventory:
Fair value
Sold
Total inventory
P 7,500
12,000
P40,875
27,000
180
P19,500
13,875
P33,375
Chapter 9
3.
Repossessed Inventory
Loss on repossession or Allowance for bad debts
Accounts receivable
To record repossessions on defaulted contracts.
Note: No deferred gross profit is cancelled because no
Ggoss profit rate on installment sales is given.
19,500
13,900
33,400
11,160
12,000
27,000