1.) Demolish Co. uses the "cost recovery method" (traditional accounting based on old USGAAP). The records of Demolish Co. show the following information:

Sales 20x1 - 10,000 20x2 - 15,000

Cost of sales 20x1 - 8,000 20x2 - 9,000

Cash collections:

- from 20x1 sales 20x1 - 7,000 20x2 - 3,000

- from 20x2 sales 20x2 - 12,000

How much is the gross profit recognized by Demolish in 20x2?

a. 2,000

b. 3,000

c. 0

d. 5,000

2.) ABC Co.'s records show the following information:

Deferred gross profit (adjusted ending balances):

from 20x1 sale 20x1 - 240,000 20x2 - 160,000

from 20x2 sale 20x2 - 324,000

Gross profit rates based on sales 20x1 - 40% 20x2 - 45%

Cash collections from:

20x1 sales 20x1 - 400,000 20x2 - 200,000

20x2 sales 20x2 - 480,000

How much are the installment sales in 20x1 and 20x2, respectively?

a. 20x1- 600,00020x2 - 480,000

b. 20x1- 1,000,00020x2 - 1,200,000

c. 20x1- 1,000,00020x2 - 1,120,000

d. 20x1- 900,000 20x2 - 720,000

3.) ABC Co. uses the installment sales method. The following information was taken from ABC's records:

Installment sales 20x1 - 1,000,000 20x2 - 1,200,000

Cost of sales 20x1 - 600,000 20x2 - 660,000

Cash collections from:

20x1 sales 20x1 - 400,000 20x2 -200,000

20x2 sales 20x2 - 480,000

How much is the total deferred gross profit on December 31, 20x2?

a. 284,000

b. 484,000

c. 324,000

d. 504,000

4.)ABC Co. produces a wide variety of frozen foods. Due to the faltering economy, ABC closed its provincial sales outlets. Instead, ABC outsourced various distributors to sell its products. Each distributor accepting delivery shall pay ABC 10% of the factory selling price of the goods delivered and accepted. However, if the distributor fails to sell all of the goods accepted before their expiration dates, ABC is obligated to repurchase the unsold goods. In June 20x1, ABC delivered goods with total factory selling price of 10,000,000to its distributors. ABC received 10% of the total factory selling price of the goods delivered. When should ABC recognize revenue from the goods delivered?

a. When ABC receives the 10% of the total factory selling price of the goods delivered.

d. When the distributor pays ABC Co.

c. When the goods are sold to the ultimate customers.

d. When the goods are shipped to the distributor

1. 5.)
2. Rooster Co. uses the installment sales method. Relevant information follows:
4. Sales 20x1 - 300,000 20x2 - 480,000
5. Cost of sales 20x1 - 240,000 20x2 - 336,000
6. Installment receivable - 20x1 20x1 - 180,000 20x2 - 60,000
7. Installment receivable - 20x2 20x2 - 360,000
9. Rooster Co. repossessed a property that was sold in 20x1 for 50,000. Total collections from this sale were 24,000. Rooster Co. expects to resell the property for 30,000 after reconditioning costs of 4,000. The normal profit margin on resale of repossessed property is 30%.

How much is the total realized gross profit in 20x2?

a. 56,000

b. 51,600

c. 53,200

d. 54,800

6.)Wing Co. consigned eight printing machines to Wind Co. Each machine costs 1,000,000 and has a suggested retail price of 2,100,000. Wing paid 200,000 in transporting the machines to the consignee's place of business. At the end of the period, Wind remitted 8,417,500 to Wing representing collections on sales during the period, after deducting the following:

Commission (based on sales net of commission)20%

Finder's fee (based on commission)5%

Delivery, installation and testing (on each unit sold)50,000

Materials generated from the testing were sold for 5,000 and included in the remittance to Wing Co. Wing Co. appropriately reported ending inventory of 3,075,000 for the unsold consigned machines.

How much profit is earned by the consignor from the sale?

a. 3,292,500

b. 3,642,500

c. 3,195,500

d. 3,092,500

7.)Rooster Co. uses the installment sales method. Relevant information follows:

Sales 20x1 - 300,000 20x2 - 480,000

Cost of sales 20x1 - 240,000 20x2 - 336,000

Installment receivable - 20x1 20x1 - 180,000 20x2 - 60,000

Installment receivable - 20x2 20x2 - 360,000

Rooster Co. repossessed a property that was sold in 20x1 for 50,000. Total collections from this sale were 24,000. Rooster Co. expects to resell the property for 30,000 after reconditioning costs of 4,000. The normal profit margin on resale of repossessed property is 30%.

How much is the profit recognized in 20x2?

a. 51,000

b. 51,600

c. 54,800

d. 56,000

8.)Garden Co. uses the installment sales method. Garden Co. sells a good costing 10,000 for an installment sale price of 16,000. Garden Co. accepts old merchandise as down payment and gives the customer a trade-in value of 4,000 for this merchandise. The fair value of the old merchandise is 6,000. Subsequent cash collections during the period amount to 6,000.How much is the realized gross profit recognized in the year of sale?

a. 5,333

b. 5,966

c. 6,667

d. 5,444

9.)On November 30, 20x1, Northup Co. consigned 90 freezers to Watson Co. for sale at 1,600 each and paid 1,200 in transportation costs. A report of sales was received on December 30, 20x1 from Watson reporting the sale of 20freezers, together with a remittance that was net of the agreed 15% commission. How much, and what month, should Northup recognize as sales revenue?

a. November- 142,800December - 0

b. November- 0December - 27,200

c.November- 0December - 32,000

d. November- 144,000December - 0

10.) Rooster Co. uses the installment sales method. Relevant information follows:

Sales 20x1 - 300,000 20x2 - 480,000

Cost of sales 20x1 - 240,000 20x2 - 336,000

Installment receivable - 20x1 20x1 - 180,000 20x2 - 60,000

Installment receivable - 20x2 20x2 - 360,000

Rooster Co. repossessed a property that was sold in 20x1 for 50,000. Total collections from this sale were 24,000. Rooster Co. expects to resell the property for 30,000 after reconditioning costs of 4,000. The normal profit margin on resale of repossessed property is 30%.

How much is the gain or loss on repossession?

a. 4,300

b. 2,900

c. 3,200

d. 3,800

10.)On December 1, 20x1, Alt Department Store received 505 sweaters on consignment from Todd. Todd's cost for the sweaters was 80 each, and they were priced to sell at 100 each. Alt's commission on consigned goods is 10%. At December 31, 20x1, 5 sweaters remained. In its December 31, 20x1 balance sheet, what amount should Alt report as payable for consigned goods?

a. 40,400

b. 45,400

c. 45,000

d. 49,000

11.)ABC Co. has the following information:

Installment sales 20x1 - ? 20x2 - ?

Cost of sales 20x1 -600,000 20x2 - 660,000

Installment receivable - 20x1 20x1 - 600,000 20x2 - 400,000

Installment receivable - 20x2 20x2 - 720,000

Gross profit rates based on sales 20x1 - 40% 20x2 - 45%

How much is the total realized gross profit in 20x2?

a. 326,000

b. 189,000

c. 268,000

d. 296,000

11.)Wing Co. consigned eight printing machines to Wind Co. Each machine costs 1,000,000 and has a suggested retail price of 2,100,000. Wing paid 200,000 in transporting the machines to the consignee's place of business. At the end of the period, Wind remitted 8,417,500 to Wing representing collections on sales during the period, after deducting the following:

Commission (based on sales net of commission)20%

Finder's fee (based on commission)5%

Delivery, installation and testing (on each unit sold)50,000

Materials generated from the testing were sold for 5,000 and included in the remittance to Wing Co. Wing Co. appropriately reported ending inventory of 3,075,000 for the unsold consigned machines.

How much is the commission earned by the consignee?

a. 2,100,000

b. 1,750,000

c. 2,450,000

d. 2,250,000

12.)Aircon, Inc. consigned ten one-horsepower air conditioning units to Argy Trading and paid 2,000 for the freight. The consignee is allowed a commission of 5% on sales. Argy Trading submitted the following report at the end of the period:

Sales (6 units) 72,000

Less: Advances to Aircon, Inc. 10,000

Selling expenses 800

Installation and delivery 1,200

Commission 7,200 19,200

Net remittance 52,800

The selling expenses and the installation and delivery costs are chargeable to Aircon. Aircon consistently marks-up its inventories at a 12.50% gross profit rate based on sales price. This does not reflect any freight. How much was Aircon's profit or loss on the consignment?

a. 2,200 profit

b. 1,400 loss

c. 52,800 profit

d. 7,800 loss

13.)ABC Co.'s records show the following information:

Deferred gross profit (adjusted ending balances):

from 20x1 sale 20x1 - 240,000 20x2 - 160,000

from 20x2 sale 20x2 - 324,000

Gross profit rates based on sales 20x1 - 40% 20x2 - 45%

Cash collections from:

20x1 sales 20x1 - 400,000 20x2 - 200,000

20x2 sales 20x2 - 480,000

How much is the total installment receivable on December 31, 20x2?

a. 1,120,000

b. 1,000,000

c. 720,000

d. 1,280,000

14.)ABC Co. uses the installment sales method. ABC Co. has the following collection policy on its installment sales:

20% down payment

Balance collectible as follows: 50% in the year of sale, 30% in the second year, and 20% in the third year.

Installment sales during 20x1, 20x2 and 20x3 were 1,200,000, 1,500,000 and 1,800,000, respectively.

Gross profit rate throughout the three years was 40% based on sales.

How much are the realized gross profits in 20x1, 20x2 and 20x3, respectively?

a. 20x1- 276,00020x2- 475,20020x3 - 628,600

b. 20x1- 286,00020x2- 487,20020x3 - 632,800

c. 20x1- 288,00020x2- 457,20020x3 - 652,800

d. 20x1- 288,00020x2- 475,20020x3 - 652,800