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Problem solving.
1. Anna Corporation, a capital goods manufacturing business that started on January 4, 2016 and
operates on a calendar year basis. The following data were taken form the records of 2016 and
2017:
2016 2017
Installment sales P 580,000 P 640,000
Gross profit as a percent of costs 25% 28%
Cash collection on sales of 2016 160,000 250,000
Cash collection on sales of 2017 - 180,000
Compute the realized gross profit to be reported in the 2017 income statement:
a) using the installment method: ___________
b) using the cost recovery method: ___________
2. On August 1, 2017, Belle Co. sold a piece of land costing P337,500 at a gross margin of 66
2/3% above cost. The buyer paid a 20% down payment and made four installments of P22,500
each during the same year. Using the installment method of accounting:
a) the total collections in 2017: __________
b) the realized gross profit in 2017: __________
3. C, Inc. began operations on January 1, 2016 and approximately uses the installment method of
accounting. The following data are available for 2016:
Installment accounts receivable, 12/31/2016 P 600,000
Installments sales for 2016 1,050,000
Gross profit on sales 40%
Under the installment method, Cs deferred gross profit at December 31, 2016 is: ___________
4. Francis Enterprise uses the installment method of accounting and it has the following data at the
year-end:
Gross profit on cost 66 2/3%
Deferred gross profit P 192,000
Cash collections including down payment 360,000
What was the total amount of sales on installment basis? ___________
5. The Mitch Subdivision sells residential subdivision lots on installment basis. The following
information was taken from the companys records as at December 31, 2016:
Installment accounts receivable, Jan. 1 P 755,000
Installment accounts receivable, Dec. 31 840,000
Deferred gross profit, Jan. 1 339,750
Installment sales 950,000
What is the balance of the deferred gross profit at Dec. 31? ___________