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Silent Night Company uses the installment method of income recognition.
The entity provided the following pertinent data:
2020 2021 2022
Installment sales 300,000.00 375,000.00 360,000.00 Cost of goods Balance sold Gross of Deferred 225,000.00 285,000.00 252,000.00 Profit at year-end 2020 52,500.00 15,000.00 2021 54,000.00 9,000.00 2022 72,000.00
Requirements: a. Compute for the gross profit rate for each year b. Compute for the ending balances of installment receivable for each year-end. c. Compute for the realized gross profit for each year. The chief accountant of Sony Appliances, Inc. provided the following balances from its unadjusted trial balance for the year end
01/01/2023 12/31/2023 Installment receivable – 2021 contract 2,000,000 500,000 Installment receivable – 2022 contract 3,000,000 1,000,000 Installment receivable – 2023 contract 5,000,000 Deferred gross profit – 2021 contract 800,000 Deferred gross profit 2022 contract 1,800,000 New inventory 200,000 300,000 Net purchases (excluding freight-in) 5,000,000 Freight-in 100,000 Cash sales for the year 2023 2,000,000 Installment sales for the year 2023 8,000,000 The following additional notes are provided for the year ended December 31, 2023: a. The gross profit rate for 2023 installment sales is the average of previous years’ gross profit rate on installment sales.
b. On July 1, 2023, Sony wrote off 2021 installment receivable with account balance of P300,000 because of the bankruptcy of Sony records its impairment loss of installment receivable using the direct write off method.
of P100,000. The defaulted account has a balance of P600,000.
repossessed inventory is not yet reflected on the cash sales stated above.
to P400,000.
Requirements: a. Compute for the gross profit rate for each year. b. Compute for the amount of gain or loss on repossession. c. Compute for the net income for the year. balance for the year ended December 31, 2023:
Cpa Review School of The Philipines Manila Financial Accounting and Reporting JULY 2021 First Preboard Examination SITUATION 1 - Three Unrelated Entities
