Ewan

CHAPTER 9
MULTIPLE CHOICE ANSWERS AND SOLUTIONS

9-1: d
Deferred gross profit, Dec. 31 (before adjustment P1,050,000
Less: Deferred gross profit, Dec. 31 (after adjustment) Installment accounts receivable, Dec. 31 P1,500,000 Gross profit rate ____÷ 25%__375,000 Realized gross profit, 2008 P 675,000
OR
Installment Sales (P1,050,000 ÷ 25%) P4,200,000
Less: Installment account receivable, Dec. 31 __1,500,00
Collection P2,700,000
Gross profit rate ___X 25%
Realized gross profit, 2008 P 675,000 9-2: a 2006 2007 2008
Deferred gross profit, before adjustment P7,230 P 60,750 P 120,150
Deferred gross profit, end
2006 (6,000 X 35%) 2,100
2007 (61,500 X 33%) 20,295
2008 (195,000 X 30%) 58,500
Realized gross profit, December 31, 2008P5,130 P 40,455 P 61,650 (Total – P107,235) 9-3: c
Deferred gross profit balance, end P 202,000
Divide by Gross profit rate based on sales (25% ÷ 125%) ____÷ 20%
Installment Accounts Receivable, end P1,010,000
Collection ___440,000
Installment Sales P1,450,000 9-4: b
Sales P1,000,000
Cost of installment sales __700,000
Deferred gross profit P 300,000
Less: Deferred gross profit, end Installment accounts receivables, 12/31 (1,000,000-400,000) P 600,000 Gross profit rate (300,000 ÷ 1,000,000) ___X 30% __180,000
Realized gross profit P 120,000
Operating expenses ___80,000
Operating income 40,000
Interest and financing charge __100,000
Net income P 140,000
9-5: a
Market value of repossessed merchandise P 30,00
(before reconditioning cost)
Less: unrecovered cost
Unpaid balance (80,000-30,000) P 50,000
Less: Deferred gross profit (50,000X20%) ___10,000 __40,000
Loss on