ADVANCED ACCOUNTING 1

INSTALLMENT SALES- AAC and BACThe Central Plain Subdivision sells residential subdivision lots in installment. The following information was taken from the accounting records of Central Plain Subdivision as at Dec. 31, 2015:Installment Accounts Receivable, Jan. 1(2014 contracts)P755,000

Installment Receivable, Dec. 3 1 (2015 contract)Installment Accounts Receivable, Dec. 31 (2014 contracts)840,000600,000

Unrealized Gross Profit, Jan. 1 (2014 contracts)339,750

Installment Sales950,000

2015 contracts gross profit rate is 5% lower than that of 2014. Question 1. Give the realized gross profit to be recognized in 2015. Question 2. Give the balances of the unrealized gross profit in Dec. 31, 2015. Mahangin Company which began operation in 2014 sells air cooling appliances and freezers in installment basis. The following information is given to you for 2015:Total cash collections (a third coming from 2014 contracts) Down payment received in 2015Deferred Gross Profit, Dec. 31 for 2015 salesGross Profit Ratio for 2015GPR for 2014 was 2% lower than the current ratioInstallment Receivable, Dec 31 (2014 contracts).P712,425250,000465,50035%

P187,525

3. What is the total amount of sales revenue for 2015 contracts?4. What is the cost of sales for 2015 contracts?5. Last 2 entries at the end of year.6. Under accrual method, what will be realized gross profit at the end of 2015?7. If instalment sales for 2014 was P750,000, using cost recovery method, how much will realized gross profit be in 2015 for the 2014 contracts.?

SOLUTIONPROBLEM A1.)20142015TOTALGPR (339.75/755)45% (45-5)40%COLLECTIONS 755-600155,000(950-840)110,000

REALIZED GP69,75044,000P113,7502.)UNREALIZED GP (339.75-69.75)P270,000(840 x 40%)P336,000

PROBLEM B3) INSTALLMENT RECBLE 12/31 465,500/35%P1,330,000ADD BACK COLLECTIONS712,425 X 2/3 474,950INSTALLMENT SALESP1,804,950

4) SALES 1,804,950 X COST RATIO 65% (100-35) = COST OF SALES P1,173,217.50

5) RGP FROM 2014 CONTRACTS (712,425 /3= 237,475 X 33% = P78,366.75RGP FROM 2015 CONTRACTS (474,950 X 35% = P166,232.50

6) INSTALLMENT SALES P1,804,950 COST OF INST SALES P1,173,217.50 DEFERRED GP- 2015 631,732.50

DEFERRED GP-2014P78,366.75DEFERRED GP-2015166,232.50 REALIZED GPP244,599.25

7) SALES OF P1,804,950 LESS COST OF SALES 1,173,217.50 = REALIZED GP P631,732.50

8) SALES OF 750,000 X 67% = TOTAL COST TO BE RECOVERED P502,500 BEFORE RECOVERY OF PROFIT

COLLECTIONSRECOVERY OF COSTRECOVERY OF PROFIT

IN 2014 P325,000325,000

IN 2015 P237,475177,50059,975

Add back ending balance to collections = beg balance of recble, thus 187,525 = 237,475= 425,000 750,000 425,000= COLLECTIONS IN 2014 P325,000

INSTALLMENT SALES- CAC and DACThe Central Plain Subdivision sells residential subdivision lots in installment. The following information was taken from the accounting records of Central Plain Subdivision as at Dec. 31, 2015:Installment Accounts Receivable, Jan. 1(2014 contracts)P755,000

Installment Receivable, Dec. 3 1 (2015 contract)Installment Accounts Receivable, Dec. 31 (2014 contracts)840,000600,000

Unrealized Gross Profit, Jan. 1 (2014 contracts)264,250

Installment Sales950,000

2016 contracts gross profit rate is 5% lower than that of 2014. Question 1. Give the realized gross profit to be recognized in 2015. Question 2. Give the balances of the unrealized gross profit in Dec. 31, 2015. Mahangin Company which began operation in 2014 sells air cooling appliances and freezers in installment basis. The following information is given to you for 2015:Total cash collections (a third coming from 2014 contracts) Down payment received in 2015Deferred Gross Profit, Dec. 31 for 2015 salesGross Profit Ratio for 2015GPR for 2014 was 2% lower than the current ratioInstallment Receivable, Dec 31 (2014 contracts).P712,425250,000465,50040%

P187,525

8. What is the total amount of sales revenue for 2015 contracts?9. What is the cost of sales for 2015 contracts?10. Last 2 entries at the end of year.11. Under accrual method, what will be realized gross profit at the end of 2015?12. If instalment sales for 2014 was P750,000, using cost recovery method, how much will realized gross profit be in 2015 for the 2014 contracts.?

SOLUTIONPROBLEM A1.)20142015TOTALGPR (264.25/755)35% (35-5)30%COLLECTIONS 755-600155,000(950-840)110,000

REALIZED GP54,25033,000P87,2502.)UNREALIZED GP (264.25-54.25)P210,000(840 x 30%)P252,000OR 600,000 X 35%

PROBLEM B3) INSTALLMENT RECBLE 12/31 465,500/40%P1,163,750ADD BACK COLLECTIONS712,425 X 2/3 474,950INSTALLMENT SALESP1,638,700

4) SALES 1,638,700 X COST RATIO 60% (100-40) = COST OF SALES P983,220

5) RGP FROM 2014 CONTRACTS (712,425 /3= 237,475 X 38% = P90,240.50RGP FROM 2015 CONTRACTS (474,950 X 40% = P189,980

INSTALLMENT SALES P1,638,700 COST OF INST SALES P983,220 DEFERRED GP- 2015 655,480

DEFERRED GP-2014P90,240.50DEFERRED GP-2015189,980.00 REALIZED GPP280,220.50

6) REALIZED GP P655,480 refer to entry for deferre)d gross profit in no. 5

7) SALES OF 750,000 X 62% = TOTAL COST TO BE RECOVERED P465,000 BEFORE RECOVERY OF PROFIT

COLLECTIONSRECOVERY OF COSTRECOVERY OF PROFIT

IN 2014 P325,000325,000

IN 2015 P237,475140,00097,475

Add back ending balance to collections = beg balance of recble, thus 187,525 + 237,475= 425,000 750,000 425,000= COLLECTIONS IN 2014 P325,000 as recovery of cost, balance of cost to be recovered in 2015