Chapter 14 ~ Consignment Sales a MULTIPLE CHOICE ~ Theory of Accounts TOA 14-1 (AICPA) Goods on consignment g a. The consignor but b. Both the Consignor c. The consignee but not the consignor. d. Neither the Consignor nor the consignee. hould be included in the inventory of not the consignee. and consignee: TOA 14-2 (AICPA) Consignor Co. paid the in-transit insurance premium for consignment goods shipped to Consignee Co. In addition, Consignor advanced part of the commission that will be due when Consignee sells the goods. Should Consignor include the in-transit insurance premium and the advanced commissions in inventory costs? Insurance Advanced premium. commission a. Yes Yes b. No No c. Yes No d. No Yes TOA 14-3 (AICPA) Jel Co,,.a consignee, paid the freight costs for goods shipped trom Dale Co., a consignor. These freight costs are to be deducted from Jel’s payment to Dale when the consignment goods are sold. Until Jel sells the goods, the freight costs should be included in Jel’s a. Cost of goods sold. b. . Freight-out costs. ©. Selling expenses. d. Accounts receivable. Scanned with CamScannerChapter 14 — Consignment Sales TOA 14-4 (Adapted) In consignment sales, the consignee . ks. a. Records the merchandise as an asset ee ree Se ipa. b. Records a liability for the merchandise hel ae othe cenain, c. Recognizes revenue when it ships merchandise sich eo : d. Prepares an “account report” for the consignor which shows sales, expenses, and cash receipts. TOA 14-5 (Adapted) In accounting for sales on consignment, sales revenue and the related cost of goods sold should be recognized by the a. Consignor when the goods are shipped to the consignee. b. — Consignee when the goods are shipped to the third party. ¢."_ Consignor when notification is received that the consignee has sold the goods, d.- Consignee when cash is received from the customer. TOA 14-6 (Author) When shall the consignor recognize Upon delivery of the consi Upon signing of the consi Upon sale by the consign Upon remittance by the c revenue from consignment sales? igned goods to the consignee. 'gnment contract, ee to final customers, Onsignee of collection to the consignor. oo 9 = TOA 14-7 (Author) . le difference shall be recognized as" *® °°" Csponding deferred gross prot a. Deferred gain on Tepossessioy b. Gain on A " presented iabili in on repossession as pare of other 4s current liability. comprehensive income. Scanned with CamScanneryer 14 — Consignment & chew ‘ales 705, c. Debit to retaine, d carmings, d. gs. Loss on repossession As part of profit or loss MULTIPLE CHOICE — Problems PROB. 14-1 (Adapted) On May 1, 2019, Holden Co. paid P5,000 for the insurance of consigned goods, while in transit, shipped to a consignee, and P7,000 for the freight. In addition, Holden’ advanced PS5,000 as part of the commission that will be due when the consignee sells the goods. The consigned goods costs Holden P50,000 and will be sold for a total amount of P80,000, What is the total amount of inventory should Holden report for the consigned goods on May 1, 2019? 50,000 62,000 67,000 97,000 aegsp PROB. 14-2 (AICPA) Stone Co. had the following consignment transactions during December 2019: Inventory shipped on consignment to Beta Co: . re Freight paid by Stone levenenny received on consignment from Alpha Co. 12.000 Freight paid by Alpha i were made through December 31, 2019. Stone’: Decanter Se at should include consigned inventory at a. 12,000 b. 12,500 c, * 18,000 d. 18,900 PROB. 14-3 (AICPA) Scanned with CamScannerChapter 14 — Consignment Sales , +s inventory account at December The following items were included in Opal Co.'s 31,2019: ice, includin; Merchandise out on consignment, at sales price, including an 40% markup on selling price a int 36,000 Goods purchased, in transit, shipped FOB shipping po! 277000 Goods held on consignment by Opal By what amount should Opal’s inventory account at December 31, 2019 be reduced? a 103,000 b, 67,000 c. 51,000 d. 43,000 PROB. 14-4 (IFRS) The Oddessa Appliance Center sells goods to a third party via an agent. During 2020, Oddessa supplies the agent with goods with a sales value of P200,000. The agent charges a commission of 15%. How much revenue should each of Oddessa and the agent recognize in profit or loss for 2020? Oddessa Agent a. 170,000 25,500 b. 200,000 25,500 c 170,000 30,000 d. 200,000 30,000 PROB. 14-5 (AICPA) a. 7,700 b. 8,500 c. 9,800 Scanned with CamScannerChapter 14 — Consignment Sales 407 d. 10,000 PROB. 14-6 (RPCPA) Aircon, Inc. consigned ten one-horsepower air conditioning units to Argy Trading and paid P2,000 for the freight out. The consignee is allowed a commission of 5% on sales. Argy Trading submitted account sales on its transactions for the month of December 2019, as follows: Sales (6 units, including 12.5% gross profit) P 72,000 Less: Advances to consignor P 10,000 Selling expenses 800 Installation and delivery 1,200 Commission 7,200 19,200 Net remittance P_52,800 How much was the net profit or loss of Aircon, Inc. on the consignment? a. 52,800 profit b. 7,800 loss c. 2,200 profit d. 1,400 loss PROB, 14-7 (RPCPA) CR Manufacturing Co. consigned to CE Trading Corp. twelve (12) Sony colored TV sets which cost P9,000 each. Freight out was paid by the consignor in the amount of P600. CE Trading sold eight (8) sets, rendered an account sales, and remitted the amount of P82,600 after deducting the following from the selling price of the sets sold: Commission on selling price 1% Selling expenses P1200 Cost of antennae given free 1400 Delivery and installation 2'800 a. The total selling price of the eight (8) sets sold by CE Trading Corp. is: Scanned with CamScannerChapter 14 — Consignment Sales a. 100,000.00 b. 88,000.00 c. 98,560.00 d. 78,571.43 b. The net profit of CR Manufacturing Co. on the eight (8) sets sold by CE Trading Corp. is: a, 40.00 b. 9,332.80 c. 10,200.00 d. 10,600.00 PROB. 14-8 (RPCPA) Stainless Works Mfg. Co., consigned 5 dozens of stainless chairs to Urban Furniture Co. on April 1, 2019. Each chair cost P120 and the consignor paid P600 for the shipment to the consignee. On August 15, 2019, 36 chairs were already sold and the consignee rendered an account sales, and remitted the balance due the consignor in the amount of P5,580 after deducting thé following: Commission at 15% of the selling priee Selling expenses P 360 Delivery and installation 180 a. How much is the profit on consignment? a 660 b. 900 c. 1,000 d. 1,260 b. The cost of the i i i The os f the inventory on consignment in the hands of Urban Furniture a. 2,880 b. 3,120 c. 3,480 d. 4,320 PROB. 14-9 (RPCPA) Scanned with CamScannerChapter 14 ~ Consignment Sates : 709 On January 1, 201 . pieces of bread toes Electrical Shop received from Marion Trading 300 cost, for a 15% commiscion "3S, © Sell these on consignment at 50% above had the remaining unsold so" Selling price, After selling 200 pieces, Pete spent P2,000. Marion subs’ rePaited for some electrical defects for which he units to P330 per unit, We™tY increased the selling price of the remaining On January 31, 2019, Pete remitt commission, P850 for delivery e: of 100 units. The consigned Bo ted P64,980 to Marion after deducting the 15% xpenses of sold units, and P2,000 for the repair 2 4 ods cost Marion Trading P200 per unit, and P900 had been paid to ship them to Pete Electrical Shop. All expenses in connection with the consignment were reimbursable to the consignee. a. The consignment profit on the units sold was: a. 12,200 b. 12,880 ce. 13,000 d. Answer not given b. The value of inventory on consignment was: a. 8,120 b. 8,800 c. 8,920 d. Answer not given PROB. 14-10 (RPCPA) ~ Philacor, Inc. consigned twelve refrigerators to Ocampo’s Emporium. The refrigerators cost P6,000 each and the consignor paid P720 for freight out. The consignee subsequently rendered an account sales for five units sold at P7,700 each, and deducted the following items from the selling price: Commission (based on sales net of commission) 10% Marketing expense (based on commission) 10% Delivery and installation (on each unit sold) P 30 How much was the net profit of the consignor on the five refrigerators sold? a. 3,815 . Scanned with CamScannerChapter 14 — Consignment Sales 710 b. 37.780 c 4,200 d. 3,395 ' i n the five refri; b. How much was the net remittance of the consignee o1 igerators sold? a 34,500 b. 33,780 c 4,500 d. 4,200 PROB. 14-11 (RPCPA) In September 2019, Conanan Books Store consigned 3,200 books, costing P60 and retailing for P100 each to Rosales Store, debiting Accounts Receivable and crediting Sales for the retail sales price. Freight cost of P3,200 was debited to Freight Expenses by the consignor. On September 30, 2019, Conanan Books Store received from Rosales Store the amount of P142,020 in full settlement of the balance due, and Accounts Receivable was credited for this amount. The consignor deducted a commission of P20 for each book sold, P180 for delivery expenses and P200 for advertising expense. How many books were actually sold by Rosales Store? a 1,424 b. 1,780 c. 2,064 d. 3,200 PROB. 14-12 (AICPA) On November 30, 2019, Northup Co. consi » N . consigned sale at P1,600 each and paid P1,200 in fingertatic, pees to Watsco Co: i received on December 30, 2019 from Watson reportin, ate report of si aes together with a remittance was net of the agreed 15% 8 the sale of 20 uch, and what month, should Northup recognize as ecneine* ommmission. How much, November December Consignment sales revenue? Ter a. 32,000 b. 0 27,200 Scanned with CamScannerChapter 14 Consignment Sates c. 144,000 d. 142,800 oo PROB. 14-13 (AICPA) On December 1 consignment from oda + Alt Department Store received $05 sweaters on were priced to el o's ct for the sweaters was PEO each, and they It’s commission on consigned goods is 10%. At December 31, 2019, five sweaters remained. In its December 31, 2019 balance sheet, vt oe should Alt report as payable for consigned goods? b. 45,400 c. 45,000 d. 40,400 PROB. 14-14 . (Author) On January 1, 2021, Entity A entered into a consignment arrangement with Entity B. The consignment arrangement provides that Entity B is entitled to 5% commission based on sales. Entity A manufactured 100 boxes of product at manufacturing cost of P200,000 On July 1, 2021, Entity A shipped through a common carrier 30 boxes.of consigned goods to Entity B. The common carrier collected the freight amounting to P3,000 from Entity B. For the year ended December 31, 2021, Entity B sold on cash 20 boxes of consigned goods to final consumers at Entity A's predetermined price of P3,000 per box. ‘a. What is the net income to be reported by Entity A for the period ended December 31, 2021? a. 15,000 b. 18,000 c. 16,400 d. 17,000 i in i ber, what is the net remittance to b b.Using the same data in preceding num! ance to be made by Entity B to Entity A as of December 31, 2021? a. 60,000 Scanned with CamScannerScanned with CamScannerTOA 16-1 (AICPA) Under the cost recov, a. b. rt d. ery . Income ie gone ethod of revenue recognition, sale of the en 284 on 2 proportionate basis as cash is eseived om the In heame is Fecognized when the cash received from the sale of the E uct is greater than the cast of the product Income is recognized immediately None of these y TOA 16-2 (Adapted) Which of the following are recognized each period under the cost recovery method? b. © d. Costs only Revenues only Both costs and revenues None of these TOA 16-3 (AICPA) Chris Co. sells equipment on installment contracts. Which of the following statements best justific recognition to account b. Cs a. es Chris’ use of the cost recovery method of revenue for these installment sales? contract provides that title to the equipment passes to the buyer The sales oc rs have been : only when all payment ? No cash payments are due until one year from the date of sale, ject to 8 high rate of return. — Or efeasonable basis for estimating collectability TOA 16-4 (AICPA) Winner Co. is engaged discovery of water. in extensive exploration for water in Utah. If, upon ‘Winner does not recognize any revenue from water sales Scanned with CamScannerChapter 16 - Installment Sales i sis of revenue recogniti until the sales exceed the costs of exploration, the ba gnition being employed is the a. Production basis b. Cash (or collection) basis c. Sales (or accrual) basis d. Cost recovery basis TOA 16-5 (AICPA) The installment method of recognizing profit for accounting purposes is acceptable if a. Collections in the year of sale do not exceed 3} b. An unrealized profit account is credited. c. Collection of the sales price is not reasonably assured. d. The method is consistently used for all sales of similar merchandise. 0% of the total sales price. TOA 16-6 (AICPA) Under the installment sales method, a. Revenue, costs, and gross profit are recognized proportionately to the cash that is received from the sale of the product. a . b. Gross profit is deferred proportionately to cash uncollected from sale of the product, but total revenue and costs are recognized at the point of sale. bs c. Gross profit is not recognized until the am< i oSeN arte tet ount of cash received exceeds 4. Revenues and costs are recognized proportionately to the cash received from the sale of th n ae ved nT 1 ine Product, but gross profit is deferred until all cash is TOA 16-7 (AICPA) Leopard Co. uses the installment sales : 7 method to recogni rs aa iene balan a ?. 4 equal monthly tmounts, which ipehide 12% ice of an installment note receivable 6 months after the a. 75% of the original sales price b. Less than 75% of the origina sales price Scanned with CamScannerChapter 16 - Instalmen Sale ‘5 : CEU 2 eee sass c. The present 12%. Value of the remaini ning monthly payments discounted at d. Less than e the discounted at 19% Sent value of the remaining monthly payments TOA 16-8 (AICPA) Cash collection j iti Is 4 critical event for income recognition in the Cost tecovery Installment method method a. No No b. Yes Yes a No Yes d. Yes No. TOA 16-9 (IFRS) According to IAS 18, Revenue, which two of the following criteria must be cee before revenue from the sale of goods should be recognized in profit or loss? 1. Revenue can be measured reliably. 2. Managerial control over the goods sold has been relinquished. 3. Ownership has been transferred to the buyer. 4. The outcome of the transaction is certain. a. land2 b. land3 c. land 4 d, 3and4 TOA 16-10 (Adapted) been sold and accounted for by the installment method are Wh ts that have " en BSS ed to inventory, they should be recorded on subsequently repossessed and return the books at b. eee of the installment receivable less associated deferred gross ‘ profit. c. Net realizable value. d. Net realizable value minus normal profit. Scanned with CamScannerBe Chepter 18 stoner Sat TOA 16-11 (Adapted) The method most commonly used to report defaults and repossessions is a. Provide no basis for the repossessed asset thereby recognizing a loss, b. Record the repossessed merchandise at fair value, recording a gain or loss if appropriate. Rpsond the repossessed merchandise at book value, recording no gain or 1OSs. d. None of these. ©. ed with CamScannerChapter 16 - Installment Sates 757 MULTIPLE CHOICE — Problems PROB. 16-1 (AICPA) On Januai receiving D2 2019, Colt Co. sold land that cost P600,000 for P800,000, installments of P3210 interest at 10%. The note will be paid in three annual the note fe wor on 12700 starting on December 31, 2019. Because collection of iS very uncertain, Colt will use the cost recovery method. How much revenue from this sale should Colt recognize in 2019? a. 0 b. 6,000 c. 8,000 d. 20,000 PROB. 16-2 (AICPA) The following information pertains to a sale of real estate by South Co. to Nord. Co. on December 31, 2019: Carrying amount 4,000,000 Sales price: Cash 600,000 Purchase money mortgage 5,400,000 6,000,000 ¢ is payable in nine annual installments of P600,000 beginning Deere at; 3020, plus interest of | 10%. The December 31, 2020 installment was paid as scheduled, together with interest of P540,000. South uses the cost recovery method to account for the sale. What amount of income should South recognize in 2020 from the real estate sale and its financing? a. 1,140,000 ~ b. 740,000 c 540,000 d. 0 Scanned with CamScannerChapter 16 - Installment Sates 758 PROB. 16-3 (AICPA) : cash flow problems. Information Severs itt, Inc.’s customers are having rch 31, 2019 and 2029 ate ve these customers for the years ended Ma pertainin, follows: 2019 __2020 10,000 15,000 Sales 8,000 9,000 Cost of sales Cash collections: 7,000 3,000 On 2019 sales 12,000 On 2020 sales mount would Pitt report as gross profit is used, what at If the cost recovery method is used, w! “fed March 31, 2020? trom sales to these customers for the year en a. 2,000 b. 3,000 c. 5,000 d. 15,000 PROB. 16-4 (AICPA) On December 31, 2019, Mill Co. sold construction equipment to Drew, Inc. for P1,800,000. The equipment had a carrying amount of P1,200,000. Drew paid P300,000 cash on December 31, 2019 and signed a P1,500,000 note bearing interest at 10%, payable in five annual installments of P300,000. Mill appropriately accounts for the sale under the installment method. On December 31, 2020, Drew paid P300,000 principal and P150,000 interest. For the yeat ended December 31, 2020, what total amount of revenue should Mill recognize from the construction equipment sale and financing? a. 250,000 b. 150,000 . c. 120,000 d, 100,000 PROB. 16-5 (AICPA) Hill Company began operations installment method of accounting, D January 1 Data aveiat 2019, and appropriately uses the ble for 2019 are as follows: Scanned with CamScannerChapter 16 - Instaliment Sates 759 Installment acco: . , Urstallment sales Ms receivable, 12/31/2019 500,000 ost of 00,000 B00dS sold, as Percentage of sales 9 ,000 Using the installm, . a. 360,009 thd, Hills realized gross profit for 2019 would be b. 240,000 & 200,000 d. 160,000 PROB. 16-6 (RPCPA) The Central Plains Subdivision sells residential subdivision lots in installment. The following information was taken from the accounting records of Central Plains Subdivision as at December 31, 2019: Installment accounts receivable, 1/1/2019 755,000 Installment accounts receivable, 12/31/2019 840,000 Unrealized gross profit, 1/1/2019 339,750 Installment sales 950,000 How muct is the realized gross profit in 2019? a. 427,500 b. 339,750 c. 378,000 d. 389,250 PROB. 16-7 (Adapted) Surplus Co. sold equipment on installment basis. The cereus Aa abe an amount of 600,000, but the installment selling price was set at 850,000. The terms of payment included the acceptance of a used equipment with the balance to be paid in ten (10) monthly installment due at the end of each month commencing the month of sale. It would require P12,500 to recondition the used equipment so that it could be sold for P250,000. A 15% gross profit was usual from sale of used equipment. Scanned with CamScannerChapter 16 - Installment Sales 760 collections? What is the realized gross profit from the 2020 a 70,588 b. 80,000 c. 100,000 d. 340,000 PROB. 16-8 (AICPA) hie Co. for P1,500,000, Id a plant to Menc' r ,000, On January 2, 2019, Easy Pay Co. sol 1 300,000. Menchie gave Easy a ‘ing amount was P1,UUN,' a Ps 0008 ca pi A P1200,000 note, payable in four annual insallments of P300 000’ plus 12% interest. Menchie ae eS firs pe a ane rent of P444,000 on December 31, 2019. Easy Pay iad of revenue recognition. In its 2019 income statement, what amount of realized gross profit should Easy Pay report? a. 344,000 b. 200,000 c. 148,000 d. 100,000 PROB. 16-9 (AICPA) Luge Co., which began operations on January 2, 2019, appropriately uses the installment method of accounting. The following information is available for 2019: Installment accounts receivable December 31, 2019 800,000 Deferred gross profit, Dec. 31 (before Recognition of realized gross profit for 2019) 560,000 Gross profit on sales 40% For the year ended December 31, 201 9, cash i i rofit ‘on sales shoud be collections and realized gross P' Cash Realized Collections Gross Profit a. 400,000 320,000 b. 400,000 240,000 c 600,000 320,000 d. 600,000 240,000 Scanned with CamScannerChapter 16 - Installment Sal; les 761 PROB. 16-10 (Adaptea) In its first year of, Operations, Gi s amount of P900,000 and sales none nore eon OF Bods sold inthe lows: Cash basis Mark-up on cost “Sales Charge basis 25% ~~~, 250,000 erp woe 600.00 / , If collecti i ach nett ata sales during the year amounted to 240,000, how Bross profit realized at the end of the year? : eo 50,000 b. 60,000 c. 80,000 d. 230,000 PROB. 16-11 (RPCPA) pie beck of Paiyakan Company’show the following balances on December 31, Accounts receivable 313,750 Deferred gross profit (before adjustment) 38,000 Analysis of the accounts receivable reveal the following: Regular accounts 207,500 2018 installment accounts 16,250 2019 installment accounts 90,000 ent basis in 2018 were made at 30% above cost; in 2019, at Sales on an installm 7 : al 33 1/3% above cost. Expenses paid was P1,500 relating to installment sales. How much is the net income on installment sales? a. 11,000 b. 11.500 c. 16,000 d. 10,250 Scanned with CamScannerChapter 16 Instaliment Sai, 762 PROB. 16-12 (AICPA) Dalek Watson Co, sold some machinery to the Finney Co. on January 2, 2019. The casp se i i installment Finney entered into an instal sales ling price would have been 473,850. Te i 2020. Balance of deferred gross profit on Oe 300,000 120,000 2020 : 440,000 30% 40% Gross profit on sales x The installment accounts receivable balance at December 31, 2020 is a. 1,000,000 b, 1,100,000 c. 1,400,000 d 1,500,000 PROB. 16-22 (AICPA) Dolce Co., which began operations on January 1, 2019, appropriately uses the installment method of accounting record revenues. The following information is available for the years ended December 31, 2019 and 2020: 2019 2020 Sales , 1,000,000 2,000,000 Gross profit realized on sales made in: 2019 150,000 90,000 2020 200,000 Gross profit percentage 30% 40% What amount of installment accounts receivab in its December 31, 2020, balance sheet? result Doles eee a ‘1,225,000 b. 1,300,000 c. 1,700,000 d. 1,775,000 Scanned with CamScannera Chapter 16 = instaut ment Sales ales : 16 _ Sree ole eee PROB. 16-23 (RPCp. A) Quincy Ente y Tprises uses the j following data at Neaeed the installment method of accounting and has the Gross margi Unreali a On cost 66 2/3% Unrealized gross profit 192,000 h collections including down payments 360,000 What was thi ir iy 280,000 amount of sale on installment basis? b. 552,000 c. 648,000 d. 840,000 PROB. 16-24 (AICPA) Baker Co. is a real estate developer that began operations on January 2, 2019. Baker appropriately uses the installment method of revenue recognition. Baker’s sales are made on the basis of a 10% down payment, with the balance payable over 30 years. Baker’s gross profit percentage is 40%, Relevant information for Baker’s first two years of operations is as follows: 2020 2019 Sale 16,000,000 14,000,000 2,020,000 1,400,000 Cash collections At December 31, 20 19, Baker’s deferred gross profit was a. 2 5,040,000 b. _ 5,600,000 os 8,400,000 d. 12,600,000 b. Baker's realized gross profit for 2020 was a. 6,400,000 b. 2,020,000 c. 1,212,000 a 808,000 Scanned with CamScannerChapter 16 - Installment Sales 768 PROB. 16-25 (Adapted) instruments on installment. On October 1, 2019, Samsing sold a karaoke costing P15,000 for ee ae the policy of Sarnsing to require its customers a down pay men : Fl for this kind of instrument and the balance to be paid on installment with an annual interest of 12% starting October 31, 2019. Periodic payments are equal in amount and represent interest on the balance of the principal owed between installment periods, the remainder a reduction in the principal balance. The Samsiny Music Corp. sells musical The karaoke was reposseszed in February 2020, when the customer defaulted after paying a total of P9,600. It was estimated that the karaoke had a depreciated cost of P8,400 when repossessed. The Samsing Music Corp. uses perpetual inventory account and enters the total deferred gross profit at the time of sale, How much is the total realized gross profit from this sale (rounded to the nearest peso)? a. 2,411 b. 3,312 c 4,356 d. 4,500 PROB. 16-26 (AICPA) Pacific Corp. usés the installment method of reporti i ii - porting. The fol 2 da ¢ gathered for its three years of operations: a lowing deta were 2018 2019 2020 Installment sales 300,000 405.000 495,000 Cost of installment sales 210-000 243,000 : Gross profit rate 30% 40% ead Balance of installment receivable, Dec. 31: ° ee 2018 installment sales 180,000 2019 installment sales pet eet es 2020 installment sales 500.000 peor 390,00 In 2020, a customer defaulted; accordingly, the merchandise with timated an est value of P15,000 was repossessed. Ti balance on the date of, icpoistisionen Pani made in 2018 and the unpaid Scanned with CamScannerToe Ste Chapter 16 - h Installment Sat Bo deat ee 769 ee a. What is the total reali b 412,500 Tealized gross profit in 2020? . 183,750 . 94,500 4. 36750 b. What is th a (7,500) Nf Bat (loss) on repossession in 2020? b (750) S 6,000 4. 3,000 PROB. 16-27 (RPCPA) The Zonyo Company on October 1, 2019, sold article “A” for P4,000, costing P2,700. Article “B”, a used article was accepted as down payment and the balance on a monthly installment payment of P200 starting November 1, 2019. P1,200 was allowed on the article traded-in. The company estimates reconditioning cost of P80 on this article and a sales price of P1,100 after such reconditioning. The company normally expects 20% gross profit on sale of used articles.. The company employs the perpetual method of inventory. On April 1, 2020, the customer defaulted in the payment of installment. Article “A” which was sold was repossessed; its value to the seller is P1,350 allowing for reconditioning cost and a normal gross profit on resale. a. The amount of realized gross profit in 2019 is: a. 300 b. 400 c. 415 d. 350 b. The amount of loss on repossession is: a. 415 b. 300 c. 450 d. 350 Scanned with CamScannerChapter 16 - Installment Sales 710 J2ROB. 16-28 (AICPA) 4 fi f 30%. A 2018 sale . has a normal gross profit on installment sales o! rooted in aan carly in 2020. At the date of default, the oaaneeiot & installment receivable was P8,000, and the repossesse me te reeardelae value of P4,500. Assuming the repossessed merchandise is to value, the gain or loss on repossession should be 0 a. b. 1,100 loss c. 1,100 gain d. 2,500 loss PROB. 16-29 (AICPA) Gentry Co. uses the installment sales method. When an account had a balance of P3,500, no further collections could be made and the dining room set was tepossessed. At that time, it was estimated that the dining room set could be sold for P1,000 as repossessed, or for P1,300 if the company spent P125 reconditioning it. The gross profit rate on this sale was 70%. What is the gain or loss on repossession? a. 2,450 loss b. 2,500 loss c. 300 gain d. 125 gain Scanned with CamScanner