Advanced Accounting May 24, 2012 The Star Company recognizes profits on the Installment Basis.

At the end of 2009, before the accounts are adjusted, the ledger shows the ff.: IAR, 2008 337,500 IAR, 2009 525,000 DGP, 2008 185,000 DGP, 2009 272,500 Regular Sales 1,500,000 Cost of Regular Sales 960,000 Each year the gross profit on Installment Sales was 8% lower than that on regular sales. In 2009, the gross profit on Installment sales was 4% higher than in 2008. 1. How much is the total realized gross profit in 2009? Sun Company which began operations on January, 2009 appropriately uses the installment method of accounting. The following data pertains to Williams operations for the year 2009. Installment Sales 180,000 Operating Expenses (before defaults and repossessions) 14,400 Regular Sales 75,000 Cash collections on Installment sales including interest of P4,800 62,400 Cost of Regular Sales 43,000 Installment receivable written off due to defaults 8,800 Cost of Installment Sales 140,000 Trade in allowance 18,000 NRV of repossessed Repossessed accounts 20,000 merchandise 10,800 Actual value of trade in merchandise 13,000 2. How much is the deferred gross profit at December 31, 2009? Moon Cars, Inc. accounts for automobile sales under the Installment Sales method. The following information relates to its past three years installment sales: Year ends 2008 Installment Sales 3,120,000 Gross profit rate based on cost 25% Balances of Installment Receivable From 2008 installment sales 859,040 From 2009 installment sales From 2010 installment sales 2009 1,440,000 33 1/3% 936,000 2010 66 2/3% 528,640 1,118,000 1,720,000

374,400

During 2010, Moon repossessed an automobile that it had sold for 256,000 in 2008. The uncollected balance of the repossessed account was 102,400. The company estimates the fair value of the repossessed item at 76,000, before any reconditioning cost. The reconditioning cost of 12,000 is needed to achieve the same gross profit for the sale of repossessed merchandise. 3. Calculate the total gross profit to be reported for 2010. 4. Calculate the total deferred gross profit at December 31, 2010 . On June 1, 2010 Meteor Company sells new car costing 1,620,000 for 2,268,000. A used car is accepted as down payment, 432,000 being allowed on the trade in. The used car can be resold for 486,000 after reconditioning cost of 64,800. The company expects to make a 20% gross profit on the sale of the used cars. During the period 270,000 was collected on the contract. 5. How much is the realized gross profit in 2010? Planet Corporation sells car on a three year installment sales contract. On December 31, 2011, the last day of Planets first year of operations, the results of operations before adjustment has Sales amounted to P1, 000,000. The Cost of installment sales is P700, 000 and operating expenses is P80, 000. The total collections during the year including interest and financing charges of P100,000 is P500,000. 6. What is the net income of Planet Corporation for the year ended December 31, 2011? Aser Computer Co. began operation at the beginning of 2011. During the year, it had cash sales of P6,875,000 and sales on installment basis of P16,500,000. Aser adds a markup on cost of 25% on cash sales and 50% on installment sales. Installment receivable at the end of 2011 is P6,600,000. 7. What is the total realized gross profit for 2011? Asteroid Company sells appliances on the installment basis. Below are information for the past three years: 2011 2010 2009 Installment Sales 750,000 600,000 400,000 Cost of sales 450,000 375,000 260,000 Collections on: 2011 installment sales 275,000 2010 installment sales 180,000 240,000 2009 installment sales 125,000 120,000 150,000 Repossessions on defaulted accounts included one made on a 2011 sale for which the unpaid balance amounted to P5,000. The depreciated value of the appliance repossessed was 2,500. 8. What is the realized gross profit in 2011 on collections of 2011 installment sales?