Advanced Accounting Part 1 On April 1, 2011, the customer defaulted in the payment of

Take Home Activity his installments. Article A was reposed and its value to the
was estimated at P135,000 after allowing for the estimated
PROBLEM A = Presented below is the unadjusted trial reconditioning cost and the normal profit on resale.
balance, as of December 31, 2009, of Boston Corporation.
Debit Credit Required:
Cash 50,000 6. The amount of realized profit in year ended 2010 was
Installment accounts receivable- 400,000 7. The amount of loss on repossession on 2011 was
2008
Installment accounts receivable- 1,400,000
2009
PROBLEM C = The following selected accounts were taken from
Inventory, December 31, 2009 2,000,000 the trial balance on December 31, 2008 of MIAMI HEAT Company:
Other Assets 4,970,000
Operating Expenses 500,000 Debit Credit
Trade accounts payable 500,000 Accounts receivable charge sales 75,000
Unrealized gross profit 2007 100,000 Installment receivable 2006 15,000
Unrealized gross profit 2008 860,000 Installment receivable 2007 45,000
Unrealized gross profit 2009 1,000,000 Installment receivable 2008 270,000
Capital Stock 6,000,000 Merchandise inventory 100,500
Retained Earnings 800,000 Purchases 390,000
Repossession gain 60,000 Freight in 3,000
Total 9,320,00 9,320,00 Repossessed Loss 39,000
0 0 Cash Sales 105,000
The cost of goods sold had been uniform over the years at Charge Sales 210,000
60% of sales and the company adopts perpetual inventory Installment Sales 523,100
procedures. On installment sales, the company charges Deferred gross profit 2006 22,200
installment accounts receivable and credits inventory and Deferred gross profit 2007 39,360
unrealized gross profit accounts.
The following additional information was also taken from the
records of MIAMI HEAT Company:
Repossessions of merchandise have been made during 2009
due to some customers, failure to pay maturing installments. a. Gross profit rate on 2006 installment
The analyses of those transactions have been summarized as sales was 30% and for 2007, the rate was 32%.
follows: b. Installment sales price exceed cash
sales price by 24%, while charge sales prices exceed cash
Inventory 108,000 sales by 20%.
Unrealized gross profit - 2007 8,000 c. The entry made for repossessed goods
Unrealized gross profit 2008 24,000 in year 2008 was
Installment accounts receivable 2007 Repossessed Loss 39,000
20,000 Installment Receivable 2006
Installment accounts receivable 2008 18,000
60,000 Installment Receivable 2007
Repossession gain 21,000
The repossessed merchandise on 2006 installment sales and
60,000
2007 installment sales has estimated realizable value of
P5,000 and P10,000 respectively.
The repossessions merchandise were unsold at December 31, d. The company failed to record the trade
2009 and it was ascertained that these were booked upon in merchandise included in the installment sales in 2008
repossession, at their original cost. A fair valuation would be transaction. The trade in merchandise value accepted was
a sales price of P80,000 after reconditioning cost of P5,000 P22,500. The company estimated the reconditioning cost of
and cost to dispose them of P5,000. this unit at P8,000 and a selling price of P37,500 after such
reconditioning cost. The company normally makes 20% profit
Required: on the sale of used units.
1. The total realized gross profit on 2009
2. The correct gain or loss on repossession on 2009
e. Merchandise on hand at the end,
excluding assigned value of trade in merchandise and
3. The adjusted inventory 2009 repossession merchandise, P33,500.
4. The total deferred gross profit on 2009
5. Net income 2009 Determine the following: (Answers with two decimal places)
8. What amount should be assigned to merchandise
inventory trade-in?
PROBLEM B = On October 1, 2010, Cleveland Co. sold article 9. How much was the total sales for 2008 if all sales were
A costing P270,000, for P400,000. Article B, a used article, on cash basis?
was accepted as down payment, with the balance payable in 10. How much is the cost of goods sold on Installment Sales
monthly installments of P20,000 starting November 1, 2010, in 2008?
P120,000 was allowed on the article traded in. The company 11. How much is the adjusted loss on repossession?
estimated the reconditioning cost of this article at P8,000 and 12. How much is the total realized gross profit in year 2008?
a selling price of P110,000 after such reconditioning cost. The
company normally makes a 20% gross profit on the sale of PROBLEMD D = MIAMI HEAT Company, which began operations
used articles. The company employs the perpetual inventory on January 1, 2008 appropriately uses the installment method of
accounting. The following data pertains to MIAMI HEATs
method and using calendar year for annual reporting.
operation for the year 2008:

Installment sales 450,00

 0
Regular sales 187,50
0
Cost of regular sales 107,50
0
Cost of installment sales 315,00
0
FMV of repossessed merchandise 27,000
Reconditioning cost 2,000
Operating expenses before defaults and
repossessions 36,000
Collection on installment sales including interest 156,00
P12,000 0
Installment receivables written-off due to defaults 22,000
Repossessed accounts 50,000

13. How much is the deferred gross profit at December 31

2008?
14. How much is the total realized gross profit at December
31, 2008?
15. What is the net income for the year ended December 31,
2008?