Activity # 1

1. Compute the amount of realized gross profit for the year 20x4.

2 Compute the amount of realized gross profit for the year 20x5.

3. Compute the amount of realized gross profit for the year 20x6.

Use the following information for questions 4 and 5:

A company incurred the following costs and received the following collections from

customers:

Costs

Collections

20x4. . . . . . . . . . . . . . . . . . . . . . . . . . .

P120,000

P 0

20x5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,000

80,000

20x6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,000

40,000

20x7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,000

100,000

20x8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0

0

4. If the company used the cost recovery method of revenue recognition, the income

that should be recognized in 20x6 is ___________________.

5. If the cost recovery method continues to be used through 20x7, the amount of 20x7

income that should be recognized is ____________________.

Use the following information for questions 6 to 10:

Johnson Enterprises uses the cost recovery method of construction accounting for

all installment sales. Complete the following table:

20x4

20x5

20x6

Installment sales . . . . . . . . . . . . . . . . . . . .

P 80,000

P 95,000

P ?

Cost of installment sales . . . . . . . . . . . . . . .. . .

?

56,050

68,250

Gross profit percentage . . . . . . . . . . . . . . . . . .

38%

?

35%

Cash collections:

20x4 sales . . . . . . . . . . . . . . . . . . . . . . . . . .

20x5 sales . . . . . . . . . . . . . . . . . . . . . . . . . .

20x6 sales . . . . . . . . . . . . . . . . . . . . . . . . . .

25,600

46,400

22,800

5,600

?

32,550

Realized Gross Profit on Installment Sales . . .

?

?

16,050

6. The installment sales in 20x6:

7. The cost of installment sales in 20x4:

8. The collections in 20x6 for 20x5 sales:

9. The realized gross profit on installments sales in 20x4:

10. The realized gross profit on installments sales in 20x5: