Company uses installment sales method of accounting.

During the year, a customer defaulted on an installment sale leaving the company no other choice but to repossess the inventory sold.

As of the date repossession, the following data are available: - The installment receivable balance is P192,000 - Gross profit rate is 30% - The fair value of the repossessed inventory after reconditioning costs of P9,600 is P115,200.

QUESTION

1.How much is the gain (loss) on repossession?

a. 34,560 gain

b. 34,560 loss

c. 28,800 loss

d. 28,800 gain

e. 30,200 gain f. 30,200 loss

2. How much is the new cost basis of the repossessed inventory?

a. 86,200

b. 88,000

c. 115,200

d. 97,920

e. 105,600