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456 Chapter 10 Installment S 14. How much was the gain or loss on the repossession in 20,g gives the a. 1,927 c. 2, 124 merchandi b. 1,867 d. 1,678 (RPCPA) 17. The jo merch Use the following information for the next two questions: a. d Cloudy Co. uses the installment sales method of accounting b. d Information on Cloudy's past operations follows: C . d. 20x1 20x2 20x3 Installment sales 300,000 405,000 495,000 18. How Cost of sales 210,000 243,000 321,750 a. 6, Gross profit rate 30% 40% 35% Installment accounts receivable, Dec. 31: Cost re - From 20x1 installment sales 180,000 135,000 60,000 19. Sou - From 20x2 installment sales 300,000 195,000 So - From 20x3 installment sales 390,000 De In 20x3, a customer defaulted. Accordingly, the merchandise with an estimated value of P15,000 was repossessed. The sale was made in 20x1 and the unpaid balance on the date of repossession was P22,500. 15. How much was the total realized gross profit in 20x3? The a. 98,400 d. 79,500 c. 89,400 P600 d. 94,500 (AICPA) inst P54 16. How much was the gain (loss) on the repossession in 20x3? 20x a. (690) b. 690 C. (750) d. 750 (AICPA) Trade-in 20 Use the following information for the next two questions: Dawn Co. uses the installment sales method. Dawn Co. sells merchandise costing P20,000 for P32,000 and accepts old merchandise with fair value of P12,000 as trade-in. Dawn Co.Installment Sales Method n 20x2? 457 gives the customer a trade-in value of P8,000 for the old merchandise and subsequently collects P12,000 17. The journal entry to record the sale, including the traded-in merchandise, includes a ccounting a. debit to "under allowance" of P4,000 b. debit to "over allowance" of P4,000. c. credit to "under allowance" of P4,000. 20x3 00 d. credit to "over allowance" of P4,000. 00 495,000 321,750 1% 18. How much is the realized gross profit? 35% a. 6,857 b. 8,888 c. 10,667 d. 12,400 60,000 Cost recovery DOO 195,000 19. Sound Co. uses the "cost recovery method." The records of 390,000 Sound Co. show the following information on a sale made on December 31, 20x1: andise with Carrying amount of goods sold 4,000,000 le was made Consideration from sale: Cash down payment 600,000 ssession was 10% Note payable 5,400,000 6,000,000 The 10% note payable is due in nine annual installments of Ox3? P600,000 beginning December 31, 20x2. The December 31, 20x2 d. 94,500 installment was paid as scheduled, together with interest of P540,000. What amount of income should Sound Co. recognize in 20x2 from the sale and the financing? b. 1,440,000 c. 1,960,000 d. 0 n in 20x3? a. 540,000 d. 750 (AICPA) 20. Cold Breeze Co. uses the "cost recovery method." Relevant information follows: 20x2 20x1 30,000 20,000 Sales 18,000 16,000 lawn Co. el Cost of sales Cash collections: accepts458 Chapter 10 - from 20x1 sales 14,000 6,000 - from 20x2 sales 24,000 How much is the gross profit recognized by Cold Breeze in 20x2? a. 4,000 b. 6,000 , c. 10,000 d. 0 (AICPA) PROBLEM 4: FOR CLASSROOM DISCUSSION Installment sales method 1. Ring Co. uses the "installment sales method." Information on Ring Co.'s sales and collections is as follows: 20x1 20x2 1,000,000 Installment sales 1,300,00 700,000 Cost of sales 845,00 500,000