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Installmet Sales Assignment

Tower Inc. sold condominium units for a gain in 2012, receiving partial payment and a mortgage note. In 2013, the buyer defaulted and the property was repossessed at a lower fair market value. The question asks to compute the gain or loss on repossession if profit was recognized at sale or proportionally to collections. P & R Motors sells jeeps on installment over three years. The question asks to calculate the total realized and deferred gross profit based on cost of sales, gross profit rates, and installment receivables for each year. Star Inc. sold fitness equipment on installment in 2013, accepting a trade-in. The question asks to calculate the realized gross profit from 2013 collections after recondition

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42 views1 page

Installmet Sales Assignment

Tower Inc. sold condominium units for a gain in 2012, receiving partial payment and a mortgage note. In 2013, the buyer defaulted and the property was repossessed at a lower fair market value. The question asks to compute the gain or loss on repossession if profit was recognized at sale or proportionally to collections. P & R Motors sells jeeps on installment over three years. The question asks to calculate the total realized and deferred gross profit based on cost of sales, gross profit rates, and installment receivables for each year. Star Inc. sold fitness equipment on installment in 2013, accepting a trade-in. The question asks to calculate the realized gross profit from 2013 collections after recondition

Uploaded by

21-38010
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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1. In August, 2012, Tower Inc.

sold condominium units costing P1,440,000 for


P2,400,000 receiving P350,000 cash and a mortgage note for the balance payable in
monthly installments. Installment received in 2010 reduced the principal of the note to
a balance of P2,000,000. The buyer defaulted on the note at the beginning of 2013,
and the property was repossessed. The property had a fair market value of P1,150,000
at the time of repossession.
Compute the gain (loss) on repossession if (1) profit is recognized at the point of sale
and (2) gross profit is recognized in proportion to collections.

2. P & R Motors sells locally manufactured jeeps on installment basis. Data presented
below related to the company’s operations for the last three calendar years:
2013 2012 2011
cost of installment sales P8,765,625 P7,700,000 P4,950,000
Gross profit rates on sales 32% 30% 38%
Installment accounts receivable, 12/31:
From 2013 sales 9,728,125
From 2012 sales 3,025,000 8,387,500
From 2011 sales 1,512,500 4,812,500
On December 31, 2013 how much is the (1) total realized gross profit and (2) deferred
gross profit?

3. Star Inc. sold a fitness equipment on installment basis on October 1,2013. The unit
cost to the company was P60,000 but the installment selling price was set at P85,000.
Terms of payment included the acceptance of a used equipment with a trade-in value
of P30,000. Cash of P5,000 was paid in addition to the traded-in equipment with the
balance to be paid in ten monthly installments due at the end of each month
commencing the month of sale. It would require P1,250 to recondition the used
equipment so that it could be resold for P25,000. A 15% gross profit was usual from
sale of used equipment. The realized gross profit from the 2013 collections amounted
to:

4. On October 2013, Haybol Realty Co. sold to Mae Balay a property for P500,000
which is carried in its books for P250,000. The company received P100,000 on the
date of the sale and a mortgage note for P400,000 payable in twenty (20) semiannual
installments of P20,000 plus interest on the unpaid principal at 16% per annum. The
realized profit to be recognized by Haybol Realty Corp. in 2013 if gross profit is
recognized periodically in proportion to collections would be

5. Robinson’s Appliance Co., sold a stove, costing P1,000 for P1,600 on September
2012. The down payment was P160, and the same amount was to be paid at the end of
each succeeding month. Interest was charged on the unpaid balance of the contract at
½ of 1% a month, payments being considered as applying first to accrued interest and
the balance to principal. After paying a total of P640, the customer defaulted. The
stove was repossessed in February 2013. It was estimated that the stove had a value of
P560 on a depreciated cost basis.
The realized gross profit and the gain (loss) on repossession on December 31,2013
are:

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