373525563-Advanced-Accounting-Drill-Problems.docx
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PROBLEM 1
Confidence Corporation sells goods on the installment basis. For the year j ust ended, the following were reported: Cost of installment sales, P8,400,000; Loss on repossession, P202,500; Wholesale value of repossessed merchandise, P1,687,500; Repossessed account, P2,700,000; Deferred gross profit after adjustment, P1,620,000. How much was the collections for the year? A. B. C. D.
P5,850,000 P6,600,000 P3,900,000 P3,150,000
PROBLEM 2
The ABC Company recognizes profit on c redit sales on instalment basis. At the end of 2 017, before the accounts are adjusted, the ledge 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 Cost of Regular sales
1,500,000 960,000
Each year the gross profit on instalment sales was 8% lower than the regular sales. In 2017, the gross profit on instalment sales was 4% higher than 20 16. How much is the total realized re alized gross profit in 2017? a. b. c. d.
229,500 769,500 181,000 721,000
PROBLEM 3
Dancing Moon Realty Corporation sold a plot of real estat e for P2,000,000. The property costing P625,000 was subsequently improved for P890,000. The term of the sale was 20% downpayment, balance payable in 12 monthly instalments plus 36% interest per annum on the unpaid balance payable at the start of each e ach month. The present value of annuity of P1 on the contract is 9.954004. Compute the following after the second instalment. The total collections to be applied to interest a. P48,000 b. P92,617.82 c. P50,000
d. P84,628 The realized gross profit is a. b. c. d.
P157,341.82 P55,498.75 P152,498.76 P310,041.42
PROBLEM 4
On November 1, 2017, Speed Motor which maintains a perpetual inventory records sold a new automobile to Rapids for P6,800,000. The cost of the car to the seller was P5,205,000. The buyer paid 30% down and received P640,00 0 allowance on an old car traded, t he balance being payable in equal monthly instalment payments commencing the month of sale. The monthly amortization was P240,000 inclusive of 12% interest on the unpaid amount of the obligation. The car traded-in has a wholesome value of P960,000 after expending cost of P180,000. After paying three instalments, the buyer defaulted and the car was subsequently repossessed. When reacquired, the car was appraised to have a fair value of P2,400,000. How much is the realized gross profit on instalment sales during 2017? a. b. c. d.
820,596 855,596 885,000 804,897
PROBLEM 5
QR Appliances sells home theatre set both on instalment and cash basis. Mr. X purchased a set from QR Appliances on March 30, 2017 for P367,500 which has a cost of P289,800. A used set is accepted as down payment, P89,600 being allowed on the trade in. The used set can be resold for P112,140 after reconditioning cost of P5,362. The company expects to make a 20% gross profit on the sale of used set. The balance of the sale is to be paid on a 10-month instalment basis starting May 1, 2016 . Mr. X defaulted payment starting November 1, 2017 and the set was immediately repossessed. The repossessed merchandise was appraised at a value of P6 5,625 at the time of repossession. QR has to incur additional cost of repairs amounting to P6,475 before the car was subsequently resold on December 1, 2016 for P90,125 cash to Mr. Y. What is the net income to be recognized for 2017? a. 69,293
b. 44,490 c. 51,415 d. 68,243 PROBLEM 6
The following selected accounts were taken from the trial balance of Survival Company as of December 31, 2017: Accounts Receivable
P750,000
Installment Receivable – 2015
150,000
Installment Receivable – 2016
450,000
Installment Receivable – 2017
2,700,000
Merchandise Inventory
525,000
Purchases
3,900,000
Freight-in
30,000
Repossessed Merchandise
150,000
Repossession Loss
240,000
Cash Sales
900,000
Charge Sales
1,800,000
Installment Sales
4,460,000
Deferred Gross Profit – 2015
222,000
Deferred Gross Profit – 2016
393,600
Operating Expenses
150,000
Shipment on Installment Sales
2,787,500
Additional information: Gross Profit rates for 2015 and 2016 installment sales were 30% and 32%, respectively. The entry for repossessed goods was:
Repossessed Merchandise 150,000 Repossession Loss 240,000 Installment Receivable – 2015 180,000 Installment Receivable – 2016 210,000 Merchandise on hand at the end of 2017 (new & repossessed) was P282,000 Required: Compute for the following 1. Total Realized Gross Profit in 2017 A. P965,400 B. P2,129,900 C. P2,011,100 D. P2,251,100 2. Balance of Deferred Gross Profit as of December 31, 2017
A. B. C. D.
P1,201,500 P1,080,300 P2,366,000 P1,628,100
3. Net income in 2017 A. P1,979,900 B. P1,739,900 C. P1,982,300 D. P1,861,100 PROBLEM 7
Achievement Company which began operations on January 1, 20 17 appropriately uses the instalment method of accounting. The following data pertain to Achievement’s operations for year 2017: Installment sales (before over/under-allowance)
P3,150,000
Operating expenses
367,500
Regular Sales
1,312,500
Total collections for the year (excluding interest of P84,000)
2,088,000
Cost of regular sales
752,500
Cost of instalment sales
2,205,000
Accounts receivable – 12/31/2017
512,500
Installment receivable written-off (no provision was made)
154,000
Estimated resale value of repossessed merchandise
290,000
Profit usual on the sale of repossessed merchandise
15%
Repossessed accounts
350,000
Actual value of trade-in Merchandise
280,000
Trade-in allowance
490,000
Reconditioning cost of the repossessed merchandise
57,500
How much is the deferred gross profit at December 31, 2017? What is the net income for the year ended December 31, 2017? A. B. C. D.
P353,500; P455,000 P353,500; P640,500 P287,000; P441,000 P287,000; P525,000
PROBLEM 8
The following account balances appear on the books of Fulfilment Company as of December 31, 2017: Cash Receivables Merchandise Inventory
P 150,000 800,000 75,000
Accounts Payable
30,000
Deferred Gross Profit – 2015
261,250
Sales
1,250,000
Purchases
640,000
Expenses
425,000
The Receivables account is a controlling account for t hree subsidiary ledgers which show the
following totals: 2016 installment contracts 150,000 2017 installment contracts 600,000 Charge accounts (terms, 30 days, net) 50,000 The Gross profit on sales on installment contract for 2016 was 55%, on installment contracts for 2017, 50%. Collections on installment contracts for 2016 total P30 0,000 for the year just closed; on installment contracts for 2017, P400,000; on charge accounts, P200,000. Account balances from installment sales made prior to 2016 were also collected. Repossession for the year was on installment contracts for 2016 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. Appraisal reports show that this repossessed merchandise has a true worth of P20,000 at the time of repossession and remain unsold at year end. The final inventory of the merchandise (new) valued at cost amounted to P45,000.
Required: Compute for the following 1. Total Realized Gross Profit in 2017 A. P626,250 B. P756,250 C. P495,000 D. P365,000 2. Net Income in 2017 A. P331,250 B. P301,250 C. P328,750 D. P382,500
PROBLEM 9
The chief accountant of Sony Appliances Inc. provided the following balances from its unadjusted trial balance for the year ended December 31, 2023: Account Installment receivable – 2021 contract
January 1, 2023
December 31, 2023
P2,000,000
P500,000
Installment receivable – 2022 contract
P3,000,000
Installment receivable – 2023 contract
P5,000,000
Deferred gross profit – 2021 contract
P800,000
Deferred gross profit – 2022 contract
P1,800,000
New inventory Net purchases Freight in
P1,000,000
P200,000
P300,000 P5,000,000 P100,000
Cash sales for year 2023
P2,000,000
Installment sales for year 2023
P8,000,000
The following additional notes are provided for the year ended De cember 31, 2023:
The gross profit rate for 2023 installment sales is the average of previous year’s gross profit rate for instalment sales. On July 1, 2023, Sony wrote off 2021 installment receivable with account balance of P300,000 because of the bankruptcy of the c ustomer. Sony records its impairment loss of instalment receivable using direct write off method. On October 1, 2023, a 2022 contract customer defaulted on the instalment due which resulted to repossession of the inventory with fair value of P100,000 . The defaulyed account has a balance of P600,000. On November 1, 2023, the repossessed inventory was sold at a cash price of P 150,000 after reconditioning it at a cost of P20,000. The sale of repossessed inventory is not yet r eflected on the cash sales stated above. The total operating expenses, exclusive of impairment loss and loss on repossession, of Sony for the year ended December 31, 2023 amount to P400,000.
1. What is the net income to be reported by Sony Inc. for the year ended December 31, 2023? a. 2,840,000 b. 3,130,000 c. 3,520,000 d. 2,980,000 2. What is the total adjusted deferred gross profit as of December 31, 2023, respectively? a. 3,200,000 b. 3,300,000 c. 3,100,000 d. 3,400,000
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