INSTALLMENT SALES

Problem 5
Problem 1 Bonus Company sold computer equipment on installment basis on
Arriola Inc. which began operations on January 2, 2017, October 1, 2017. The cost to the company was P60, 000 but the
appropriately uses the installment method of accounting. The installment sales price was set at P85,000. Terms of the payment
following information pertains to Arriola perations for 2017: included the acceptance of a used computer equipment with a trade
in value of P30,000. Cash of P5,000 was paid in addition to the
Installment Sales P1,000,000 trade-in equipment with the balance to be paid in ten monthly
Regular Sales 600,000 installment due at the end of each month commencing the month of
Cost of Installment Sales 500,000 sale. The estimated selling price of the used computer equipment
Cost of Regular Sales 300,000 after reconditioning cost of P1,250 is P25,000. A 15% gross profit
Operating Expenses 100,000 was usual from the sale of used equipment.
Collections on Installment Sales 200,000
What is the gross profit to be realized from the 2017 collections?
In its December 31, 2017, what amount should Suarez, Inc report
as deferred gross profit? Problem 6

Problem 2
On January 2, 2017, Cuares Company sold a car to Mr. JD for
P1,050,000. On this date, the car cost P735,000. Mr. JD paid
P150,000 as down payment and signed a P900,000 interest bearing
note at 10%. The note was payable in three annual installments of
P300,000 beginning January 1, 2018. Mr. JD made a timely payment
for the first installment on January 1, 2017 of P390,000 which
included interest of P90,000 to date of payment. Cuares Company
uses installment method of accounting.
In its December 31, 2017 Statement of Financial Position, what
amount should Cuares Company report as deferred gross profit?
Problem 3
The books of Lee Company, Inc, show the following balances on
December 31, 2017:
Accounts Receivable P1,255,000
Deferred Gross Profit (before Adjustment) 152,000
Garcia Motor sells cars both on installment and cash basis. On
March 30, 2017, Garcia motors sold a car to Mr. Tom for P525,000
costing P414,000. A used car is accepted as down payment,
P128,000 being allowed on the trade-in. The used car can be resold
for P160,200 after reconditioning cost of P7,660. The company
expects to make a 20% gross profit on the sale of a used car. The
balance of the sale is to be paid on a 10-month installment basis
starting May 1, 2017.
Mr. Tom defaulted payment starting November 1, 2017. And the car
was immediately repossessed. The repossessed car was appraised at
a value of P93,750 at the time of repossession. Garcia motors had to
incur additional cost of repairs amounting to P9,250 before the car
was subsequently resold on December 1, 2017 for P128, 750 to Mr.
Lim.
What is the realized gross profit on December 31, 2017?
What is the net income for the year ended December 31, 2017?

Analysis and aging of the accounts receivable reveal the following: Problem 7
Thor following selected accounts were taken from the trial balance
Regular Accounts P930,000 of Paulyne Company as of December 31, 2017:
2016 Installment accounts 65,000 Accounts Receivable P 750,000
2017 Installment accounts 360,000 Installment Receivable-2015 150,000
Installment Receivable-2016 450,000
Sales on an installment basis in 2016 were made at 30% above cost,
Installment Receivable-2017 2,700,000
in 2017, at 33 1/3% above cost.
Merchandise Inventory 525,000
What is the total realized gross profit for the year ended December Purchases 3,900,000
31, 2017? Freight in 30,000
Repossessed Merchandise 150,000
Problem 4 Repossession Loss 240,000
Dating Company sold goods on installment. For the year just ended, Cash Sales 900,000
the following were reported: Charge Sales 1,800,000
Installment Sales P6,000,000 Installment Sales 4,460,000
Cost of Installment Sales 4,050,000 Deferred Gross Profit-2015 222,000
Collections on Installment Sales 3,600,000 Deferred Gross Profit-2016 393,600
Repossessed accounts 400,000 Operating Expenses 150,000
Fair Value of the repossessed merchandise 240,000
Shipment on Installment Sales 2,787,500
What is the loss on repossession?
Additional Information:
How much is the realized gross profit for the year ended? Gross profit rates for 2015 and 2016 installment sales
were 30% and 32%, respectively.
How much is the deferred gross profit for the year ended? The entry for repossessed goods was:
Repossessed Merchandise 150,000
Repossession Loss 240,000
 Installment Receivable-2015 180,000
Installment Receivable-2016 210,000 Problem 10
Merchandise on hand at the end of 2017 (new and
repossessed) was P282,000. Pogi, Inc, sells computers on installments basis. For the year ended
December 31, 2017, the following were reported:
a. Total Realized Gross Profit in 2017
Cost of Installment Sales P525,000
b.
Loss on Repossessions 13,500
c. Balance of Deferred Gross Profit as of December 31, 2017 Fair value of reposed merchandise 112,500
Account defaulted 180,000
d. Net Income in 2017 Deferred gross profit, December 31 108,000

Problem 8 How much was collected during the year?

Layson Company which began operations on January 1, 2017 -------------------------------------END-----------------------------------------------

appropriately uses the installment method of accounting. The
following data pertain to Layson operations for year 2017.

Installment Sales (before over/under-allowance P3,150,000

Operating Expenses 367,500
Regular Sales 1,312,500
Total Collections during the year (excluding interest
of P84,000) 2,088,000
Cost of regular sales 752,500
Cost of installment sales 2,205,000
Accounts Receivable-12/31/2017 512,500
Installment Receivable written-off (no provision
was made) 154,000
Estimated resale value of repossessed goods 290,000
Profit usual on the sale of repossessed goods 15%
Repossessed Accounts 350,000
Actual value of trade-in Merchandise 280,000
Trade-in Allowance 490,000
Reconditioning Cost of the repossessed goods 57,500

How much is the deferred gross profit at December 31, 2017?

What is the net income for the year ended December 31, 2017?

Problem 9

San Pedro Appliance Company uses the installment method of

accounting. Pertinent data from the companys records show the
following:
2017 2018 2019
Installment P750,000 P937,500 P900,000
Sales
Cost of 562,500 712,500 630,000
Installment
Sales
Deferred
Gross Profit,
December
31:
2017 141,250 45,000
2018 150,000 30,000
2019 195,00

a. How much is the total collections during 2019?

b. What is the total balance of the Installment Accounts
Receivable account as of December 31, 2019?