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The Central Plain Subdivision sells residential subdivision lots in installment. The following
information was taken from the accounting records of Central Plain Subdivision as at Dec. 31, 2015:
Installment Accounts Receivable, Jan. 1(2014 contracts)
P755,000
Installment Receivable, Dec. 3 1 (2015 contract)
840,000
Installment Accounts Receivable, Dec. 31 (2014 contracts)
600,000
Unrealized Gross Profit, Jan. 1 (2014 contracts)
339,750
Installment Sales
950,000
2015 contracts gross profit rate is 5% lower than that of 2014.
Question 1. Give the realized gross profit to be recognized in 2015.
Question 2. Give the balances of the unrealized gross profit in Dec. 31, 2015.
Mahangin Company which began operation in 2014 sells air cooling appliances and freezers in
installment basis. The following information is given to you for 2015:
Total cash collections (a third coming from 2014 contracts)
P712,425
Down payment received in 2015
250,000
Deferred Gross Profit, Dec. 31 for 2015 sales
465,500
Gross Profit Ratio for 2015
35%
GPR for 2014 was 2% lower than the current ratio
Installment Receivable, Dec 31 (2014 contracts).
P187,525
3.
4.
5.
6.
7.
SOLUTION
PROBLEM A
1.)
GPR
(339.75/755)
COLLECTIONS 755-600
REALIZED GP
2.)
UNREALIZED GP (339.75-69.75)
2014
45%
155,000
(45-5)
(950-840)
69,750
P270,000
(840 x 40%)
PROBLEM B
3) INSTALLMENT RECBLE 12/31 465,500/35%
ADD BACK COLLECTIONS 712,425 X 2/3
INSTALLMENT SALES
2015
40%
110,000
TOTAL
44,000
P113,750
P336,000
P1,330,000
474,950
P1,804,950
P1,804,950
P1,173,217.50
631,732.50
P78,366.75
166,232.50
P244,599.25
RECOVERY OF COST
325,000
177,500
RECOVERY OF PROFIT
59,975
P755,000
840,000
600,000
264,250
950,000
SOLUTION
PROBLEM A
1.)
GPR
(264.25/755)
COLLECTIONS 755-600
REALIZED GP
2.)
UNREALIZED GP (264.25-54.25)
OR 600,000 X 35%
2014
35%
155,000
(35-5)
(950-840)
54,250
P210,000
PROBLEM B
3) INSTALLMENT RECBLE 12/31 465,500/40%
ADD BACK COLLECTIONS 712,425 X 2/3
INSTALLMENT SALES
(840 x 30%)
2015
30%
110,000
TOTAL
33,000
P87,250
P252,000
P1,163,750
474,950
P1,638,700
P1,638,700
DEFERRED GP-2014
DEFERRED GP-2015
REALIZED GP
P90,240.50
189,980.00
P983,220
655,480
P280,220.50
RECOVERY OF COST
325,000
140,000
RECOVERY OF PROFIT
97,475