INSTALLMENT SALES

Problem 1. The following selected accounts were taken from the trial balance of Survival Company as of
December 31, 2013:
The entry for repossessed goods was:
RM
RL

150,000
240,000
IR-2011
IR-2012

180,000
210,000

RM
DGP 2011
DGP 2012
RL

150,000
54,000
67,200
118,800
IR-2011
IR-2012

180,000
210,000

1. Total Realized Gross Profit in 2013 2.

2. Balance of Deferred Gross Profit as of December 31, 2013
3. Net income in 2013
P1
Beg Inv.

525,000

Purchases

3,900,000

Freight in

30,000

2011
Beg ISAR

1,230,000

Rep. Accounts

(180,000)

(210,000)

(410,000)
150,000

(570,000)
450,000

(1,760,000)
2,700,000

30%

32%

37.5%

45,000

144,000

1,012,500

150,000
4,605,000

Collections
End. ISAR

Less: Shipment on IS

2,787,500

GP rate

TGAS for regular sales

1,817,500

DGP

282,000

Cost of regular sales

1,535,500

Cash sales

1,201,500

900,000

Charge sales
Total sales

1,800,000
2,700,000

Less: COS

1,535,500

GP on regular sales
RGP 11 (410,000 x 30%)
RGP 12 (570,000 x 32%)
RGP 13 (1,760,000 x 37.5%)
Total RGP
OPEX
Repossesssion Loss
Net Icome

1,164,500
123,000
182,400
660,000
2,129,900
(150,000)
(118,800)
1,861,100

2013

740,000

Repossessed Merchandise
TGAS

Less: End. Inventory

2012

4,460,000

Problem 2. Achievement Company which began operations on January 1, 2013

TIM
280,000
Over Allow. 210,000
IS
490,000

RM
DGP
Loss

189,000
89,500
73,500
ISAR
350,000
(290,000 x 85%) 57,500 = 189k

Bad Debts Exp. 115,500

DGP
38,500
ISAR
154,000

How much is the deferred gross profit at December 31, 2013? What is the net income for the year ended
December 31, 2013?
P2
IS net of over allowance

2,940,000

GP on RS (1,312,500 - 752,500)
RGP (1,288,000 x 25%)

560,000
322,000

Less: Cost of IS

2,205,000

TRGP

882,000

GP

735,000

GP rate

25%

Interest income

84,000

Opex including bad debts

Loss on repossession

(367,500)
(73,500)

Net income
Total collections
Less: RS

525,000

2,088,000
1,312,500

Less: AR end 512,500

Collection on IS
IS net of overallowance
Collections
Write off
Rep. Accounts
ISAR 12/31/13
GPRate
DGP

Answer

800,000
1,288,000
2,940,000
(1,288,000)
(154,000)
(350,000)
1,148,000
25%
287,000

Problem 3. The following account balances appear on the books of Fulfillment Company
Merchandise repossessed was erroneously debited as a newly acquired merchandise equal to the
amount defaulted by the customer.
Appraisal reports show that this repossessed merchandise has a true worth of P20,000 at the time of
repossession and remain unsold at year end.
RM
20,000
DGP 27,500
DGP 27,500
RM 20,000
Loss
2.500
Loss 2,500
ISAR
50,000
Purchases 50,000
The final inventory of the merchandise (new) valued at cost amounted to P45,000.

P3
Beg. Inv
Purchases (640 - 50)
Rep. Merch.
TGAS
Ship. On IS (1M x 50%)
TGAS on RS
Less: End. Inv.
Cost of Reg. Sales

75,000
590,000
20,000
685,000
(500,000)
185,000
65,000
120,000

Reg. Sales (1.25M - 1M)

250,000

CORS

120,000

GP
RGP 2011

130,000
261,250

RGP 2012 (300k x 55%)

165,000

RGP 2013 (400k x 50%)

Total RGP

200,000
756,250

Opex
Loss on rep.

(425,000)
(2,500)

Net Income

328,750

Problem 4. Confidence Corporation sells goods on the installment basis. How much was the collections for the
year?
P4
Rep. Accounts
Rep. Merch

2,700,000
(1,687,500)

Loss on Rep.

(202,500)

DGP

810,000

GPR (810/2,700)

30%

DGP or IS

3,600,000

12,000,000

(810,000)

(2,700,000)

RGP / Collections

(1,170,000)

(3,900,000)

DGP / ISAR 12/31

1,620,000

5,400,000

DGP on Rep/ AR

ANSWER