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Advanced Accounting Solutions Chapter 7 Problems

This document outlines the accounting entries for a company's sales, collections, expenses, and adjustments over two years, 20x4 and 20x5. It records regular and installment sales, cost of goods sold, collections, expenses, accruals, and deferrals. Adjusting entries are made at year-end to recognize accrued revenue and expenses. Closing entries move the results to income summary and retained earnings accounts to wrap up each period.

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538 views

Advanced Accounting Solutions Chapter 7 Problems

This document outlines the accounting entries for a company's sales, collections, expenses, and adjustments over two years, 20x4 and 20x5. It records regular and installment sales, cost of goods sold, collections, expenses, accruals, and deferrals. Adjusting entries are made at year-end to recognize accrued revenue and expenses. Closing entries move the results to income summary and retained earnings accounts to wrap up each period.

Uploaded by

john carlos doringo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Problem IV

1.
January to December 31 20x4 20x5
(1) To record regular sales:
Accounts receivable 600,000 1,080,000
Sales 600,00 1,080,000

(2) To record installment sale:


Cash 60,000 144,000
Installment accounts receivable 300,000 336,000
Installment Sales 360,000 480,000

(3) To record cost of sales:


Periodic Method: No entry

Perpetual Method:
Regular Sales:
Cost of Sales 480,000 864,000
Merchandise inventory 480,000 864,000

Installment Sales:
Cost of installment sales 252,000 312,000
Merchandise inventory 252,000 312,000

(4) To record collections:


Regular Sales:
Cash 144,000 360,000
Accounts receivable 144,000 360,000

Installment Sales:
Cash 108,000 204,000
Installment Accounts receivable –
20x2 72,000 72,000
Installment Accounts receivable –
20x3 60,000
Interest income 36,000 72,000

(5) to record payment of operating expenses:


Operating expenses 90,000 102,000
Cash 90,000 102,000
2.

Adjusting entries (end of the year):


(6) To recognize accrued interest receivable
Interest receivable 1,440 2,880
Interest income 1,440 2,880

(7) To set-up Cost of Sales:


Periodic Method:
Cost of sales 480,000 864,000
Merchandise inventory 480,000 864,000

Perpetual Method: No entry

(7) To set-up Cost of Installment Sales:


Periodic Method:
Cost of installment sales 252,000 312,000
Shipment s on installment sales 252,000 312,000

Perpetual Method: No entry

(8) To set-up Deferred Gross Profit


Installment sales 360,000 480,000
Cost of installment sales 252,000 312,000
Deferred gross profit – 20x4 108,000
Deferred gross profit – 20x5 168,000
Gross profit rate – 20x4: P 108,000 / P360,000 = 30%.
Gross profit rate – 20x5: P168,000 / P480,000 = 35%.

(9) To record realized gross profit on installment


sales:
Deferred gross profit – 20x4 39,600 *21,600
Deferred gross profit – 20x5 71,400
Realized gross profit 39,600 93,000
*P72,000 x 30%
20x4: Realized gross profit on installment sales:
Collections applying as to principal..……………………………P132,000
Multiplied by: Gross profit rate……………………………………. 30%
Realized gross profit…………………………………………………P 39,600

20x5: Realized gross profit on installment sales;


20x4 20x5
Collections – principal…………… P 72,000 *P204,000
Multiplies by: Gross profit %.......... ____30% ____35%
Realized gross profit……………… P 21,600 P 71,400 P 93,000
*P144,000 + P60,000
Closing entries:
(10) To close realized gross profit account:
Realized gross profit 39,600 93,000
Income summary 39,600 93,000

(11) To close other nominal accounts


Sales 600,000 1,080,000
Interest income 37,440 74,880
Cost of sales 480,000 864,000
Operating expenses 90,000 102,000
Income summary 67,440 188,880

(12) To close results of operations:


Income summary 107,040 281,880
Retained earnings 107,040 281,880

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