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    Installment Sales

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    Lyanna Mormont
    The ABC Company recognizes profit on credit sales over time. In 2016, the company's installment accounts receivable were $525,000 and deferred gross profit was $272,500. Regular sales in 2016 were $1,500,000 with costs of $960,000. The gross profit on installment sales was 4% higher than 2015. The total realized gross profit in 2016 was $769,500.

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    Installment Sales

    Uploaded by

    Lyanna Mormont
    636 views3 pages
    The ABC Company recognizes profit on credit sales over time. In 2016, the company's installment accounts receivable were $525,000 and deferred gross profit was $272,500. Regular sales in 2016 were $1,500,000 with costs of $960,000. The gross profit on installment sales was 4% higher than 2015. The total realized gross profit in 2016 was $769,500.

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    Installment Sales

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    The ABC Company recognizes profit on credit sales over time. In 2016, the company's installment accounts receivable were $525,000 and deferred gross profit was $272,500. Regular sales in 2016 were $1,500,000 with costs of $960,000. The gross profit on installment sales was 4% higher than 2015. The total realized gross profit in 2016 was $769,500.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    636 views3 pages

    Installment Sales

    Uploaded by

    Lyanna Mormont
    The ABC Company recognizes profit on credit sales over time. In 2016, the company's installment accounts receivable were $525,000 and deferred gross profit was $272,500. Regular sales in 2016 were $1,500,000 with costs of $960,000. The gross profit on installment sales was 4% higher than 2015. The total realized gross profit in 2016 was $769,500.

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    © All Rights Reserved
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    INSTALLMENT SALES

    1. The ABC Company recognizes profit on credit sales on installment basis.


    At the end of 2016, before the accounts are adjusted, the ledger shows
    the following:

    Installment Accounts receivable 2015 337,500


    Installment Accounts receivable 2016 525,000
    Deferred gross profit 2015 185,000
    Deferred gross profit 2016 272,500
    Regular Sales 1,500,000
    Cost of Regular Sales 960,000

    Each year the gross profit on installment sales wag 8% lower than the
    regular sales. In 2016, the gross profit on installment sales was 4%
    higher than 2015.

    How much is the total realized gross profit in 2016?


    A. 229,500
    B. 769,500
    c. 181,000
    D. 721.000

    2. The following account balances appeared on the books of FRC Company


    on December 31, 2016 :

    Receivables 150,000 800,000


    Merchandise 75,000 30,000
    inventory Accounts 261,250 640,000
    Payable Deferred 425,000
    gross profit-2014
    Sales Purchases
    Expenses
     The Receivables account is a controlling account for three subsidiary
    ledgers which showed the following totals:

    2015 installment contracts 150,000


    2016 contracts Charge 600,000
    accounts (terms, 30 days, 50,000
    net)

     The gross profit on sales was 55% on installment contracts for 2015
    and 50% on installment contracts for 2016.

     Collections on installment contracts for 2015 totaled P300,000 for


    the year just closed. on installment contracts for 2016, P400,000 and
    on charge accounts, P200,000.

     Account balances from installment sales made prior to 2015 were also
    collected.

     Repossession for the year was on installment contracts for 2015 on


    which the uncollected balance at the time of repossession amounted
    to P50,000.

     Merchandise repossessed was erroneously debited as a newly acquired


    merchandise equal to the amount defaulted by the customer.

     This repossessed merchandise had a worth of 20,000 at the time of


    repossession and was unsold at year end.

     The final inventory of the merchandise (new) valued at cost amounted


    to P45,000.

    1. What is the realized goss profit in 2016?


    a. 626,250
    b. 756250
    c. 495,000
    d. 365,000

    2. What is the net income for 2016?


    a. 331,250
    b, 301,250
    c. 328,750
    d. 382,500
    3. On November 1, 2016, Speed Motor which maintains a perpetual inventory
    records sold a new automobile to Rapids for 6,8000,000. The cost of the
    car to the seller was 5,205,000..

    The buyer paid 30% down and received 640,000 allowance on an old car traded
    the balance being payable in equal monthly installment payments
    commencing the month of sale.

    The monthly amortization was 240,000 inclusive of 12% interest on the


    unpaid amount or the obligation.

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