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142 Chapter 9

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, 2008 P5,130 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 charges __100,000 Net income P 140,000
Installment Sales 143

9-5: a Market value of repossessed merchandise P 30,000 (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 repossession (P 10,000)

9-6: a Installment sales P1,000,000 Less:
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