CHAPTER 9 - 142 Chapter 9 CHAPTER 9 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 9-1 d Deferred gross profit Dec 31(before adjustment Less Deferred gross

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142 Chapter 9 CHAPTER 9 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 9-1: d Deferred gross profit, Dec. 31 (before adjustment) P1,050,000 Less: Deferred gross profit, Dec. 31 (after adjustment) Installment accounts receivable, Dec. 31 P1,500,000 Gross profit rate ____ ÷ 25% __375,000 Realized gross profit, 2008 P 675,000 OR Installment Sales (P1,050,000 ÷ 25%) P4,200,000 Less: Installment account receivable, Dec. 31 __1,500,00 Collection P2,700,000 Gross profit rate ___X 25% Realized gross profit, 2008 P 675,000 9-2: a 2006 2007 2008 Deferred gross profit, before adjustment P7,230 P 60,750 P 120,150 Deferred gross profit, end 2006 (6,000 X 35%) 2,100 2007 (61,500 X 33%) 20,295 2008 (195,000 X 30%) ___58,500 Realized gross profit, December 31, 2008 P5,130 P 40,455 P 61,650 (Total – P107,235) 9-3: c Deferred gross profit balance, end P 202,000 Divide by Gross profit rate based on sales (25% ÷ 125%) ____ ÷ 20% Installment Accounts Receivable, end P1,010,000 Collection ___440,000 Installment Sales P1,450,000 9-4: b Sales P1,000,000 Cost of installment sales __700,000 Deferred gross profit P 300,000 Less: Deferred gross profit, end Installment accounts receivables, 12/31 (1,000,000-400,000) P 600,000 Gross profit rate (300,000 ÷ 1,000,000) ___X 30% __180,000 Realized gross profit P 120,000 Operating expenses ___80,000 Operating income 40,000 Interest and financing charges __100,000
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Net income P 140,000 Installment Sales 143 9-5: a Market value of repossessed merchandise P 30,000 (before reconditioning cost) Less: unrecovered cost Unpaid balance (80,000-30,000) P 50,000 Less: Deferred gross profit (50,000X20%) ___10,000 __40,000 Loss on repossession (P 10,000) 9-6: a Installment sales P1,000,000 Less: collection on installment sales __200,000 Installment account receivables, 12/31/08 800,000 Gross profit rate (500,000 ÷ 1,000,000) ___X 50% Deferred gross profit, 12/31/08 P 400,000 OR Deferred gross profit (1,000,000-500,000) P500,000 Less: Realized Gross Profit (200,000 X 50%) _100,000 Deferred gross profit, 12/31/08 P400,000 9-7: d Fair value of repossessed merchandise P120,000 Less: unrecovered cost Unpaid balance P 200,000 Less: Deferred gross profit (200,000 X 32.5%) ___65,000 _135,000 Loss on repossession (P 15,000) 9-8: b Realized gross profit: Collections: Downpayment P 35,000 Installment received (205,000-200,000) ___5,000 Total 40,000 Gross Profit Rate (150,000 ÷ 240,000) _X 62.5% Realized gross profit P 25,000 Gain (loss) on repossession: Appraised value of repossessed merchandise P165,000 Less:unrecovered cost unpaid balance P 200,000 less: deferred gross profit (200,000 X 62.5%) __125,000 __75,000 Gain on repossession P 90,000
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144 Chapter 9 9-9: b Sch.1 Applying Applying Balance to to of Date Collection Interest principal principal Apr-1 P7,000.00 Apr-1 750 750.00 6,250.00 May-1 625 125.00 500.00 5,750.00 Jun-1 625 115.00 510.00 5,240.00 Jul-1 625 104.80 520.20 4,719.80 Aug-1 625 __94.40 ___530.60 4,189.00 P439.20 P2,810.80 Gain (loss) on repossession: Market value of repossessed merchandise P 1,875 Less:unrecovered cost unpaid balance of principal (sch. 1) P 4,189 less: deferred gross profit (4,189 X 35%) __1,466 ___2,723 Loss on repossession (rounded) (P 848) Realized gross profit: Collection applying to principal (sch. 1) P2,810.80 Gross profit rate __X 35% Realized gross profit P 983.78 9-10: c Year of Sales 2007 2008 Deferred gross profit (Sales X Gross Profit Rate) 2007 (P300,000 X 30%) P 90,000 2008 (P450,000 X 40%) P 180,000 2007: Accounts written-off (P25,000 X 30%) ( 7,500) Realized gross profit (P100,000 X 30%) ( 30,000) 2008: Accounts written-off, 2007 (P75,000 X 30%) ( 22,500) Accounts written-off, 2008 (P50,000 X 40%) ( 60,000) Realized gross profit, 2007 (P50,000 X 30%) ( 15,000) Realized gross profit, 2008 (P150,000 X 40%) ________ ( 60,000 ) Deferred gross profit, 12/31/08 (P75,000) P 15,000 P 60,000 9-11: a Deferred gross profit, 2007 (P1,050,000 - 735,000) P 315,000 Realized gross profit, 2007 (P150,000 X 30%) ( 45,000 ) Deferred gross profit, 12/31/07 270,000 Realized gross profit, 2008 (P390,000-90,000) X 30% ( 90,000) Deferred gross profit, 12/31/08 P 180,000
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Installment Sales 145
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This note was uploaded on 08/12/2010 for the course ACC 452 taught by Professor Mr.cula during the Spring '10 term at Abraham Baldwin Agricultural College.

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CHAPTER 9 - 142 Chapter 9 CHAPTER 9 MULTIPLE CHOICE ANSWERS AND SOLUTIONS 9-1 d Deferred gross profit Dec 31(before adjustment Less Deferred gross

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