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Advanced Accounting Part 1

Take Home Activity


Required:
PROBLEM A = Presented below is the unadjusted trial balance, as of 6. The amount of realized profit in year ended 2017 was
December 31, 2017, of Tigreal Corporation. 7. The amount of gain or loss on repossession on 2018 was

Debit Credit PROBLEM C = The following selected accounts were taken from the trial
Cash 50,000 balance on December 31, 2016 of Zilong Company:
Installment accounts receivable-2006 400,000
Debit Credit
Installment accounts receivable-2017 1,400,000
Accounts receivable – charge sales 75,000
Inventory, December 31, 2017 2,000,000
Installment receivable – 2014 15,000
Other Assets 4,970,000 Installment receivable – 2015 45,000
Operating Expenses 500,000 Installment receivable – 2016 270,000
Trade accounts payable 500,000 Merchandise inventory 100,500
Unrealized gross profit – 2015 100,000 Purchases 390,000
Unrealized gross profit – 2016 860,000 Freight in 3,000
Unrealized gross profit – 2017 1,000,000 Repossessed Loss 39,000
Capital Stock 6,000,000 Cash Sales 105,000
Retained Earnings 800,000 Charge Sales 210,000
Repossession gain 60,000 Installment Sales 523,100
Total 9,320,000 9,320,000 Deferred gross profit – 2014 22,200
Deferred gross profit – 2015 39,360
The cost of goods sold had been uniform over the years at 65% of
sales and the company adopts perpetual inventory procedures. On The following additional information was also taken from the records of
installment sales, the company charges installment accounts receivable Zilong Company:
and credits inventory and unrealized gross profit accounts.
a. Gross profit rate on 2014 installment sales
was 30% and for 2015, the rate was 32%.
Repossessions of merchandise have been made during 2017 due to b. Installment sales price exceed cash sales
some customers, failure to pay maturing installments. The analyses of price by 24%, while charge sales prices exceed cash sales by 20%.
those transactions have been summarized as follows: c. The entry made for repossessed goods in
year 2016 was
Inventory 108,000 Repossessed Loss 39,000
Unrealized gross profit - 2015 8,000 Installment Receivable – 2014 18,000
Unrealized gross profit – 2016 24,000 Installment Receivable – 2015 21,000
Installment accounts receivable – 2015 20,000 The repossessed merchandise on 2014 installment sales and 2015
Installment accounts receivable – 2016 60,000 installment sales has estimated realizable value of P5,000 and
Repossession gain 60,000 P10,000 respectively.
d. The company failed to record the trade in
The repossessions merchandise were unsold at December 31, 2017 merchandise included in the installment sales in 2016 transaction.
and it was ascertained that these were booked upon repossession, at The trade in merchandise value accepted was P24,000. The company
estimated the reconditioning cost of this unit at P7,500 and a selling
their original cost. A fair valuation would be a sales price of P75,000
price of P37,500 after such reconditioning cost. The company
after reconditioning cost of P4,000 and cost to dispose them of P3,000.
normally makes 20% profit on the sale of used units.
e. Merchandise on hand at the end, excluding
Required: assigned value of trade in merchandise and repossession
1. The total realized gross profit on 2017 merchandise, P33,500.
2. The correct gain or loss on repossession on 2017
3. The adjusted inventory 2017 Determine the following: (Answers with two decimal places)
4. The total deferred gross profit on 2017 8. What amount should be assigned to merchandise inventory
5. Net income 2017 trade-in?
9. How much was the total sales for 2016 if all sales were on cash
basis?
PROBLEM B = On October 1, 2017, Pharsa Co. sold article “A” 10. How much is the cost of goods sold on Installment Sales in
costing P270,000, for P400,000. Article B, a used article, was 2016?
accepted as down payment, with the balance payable in monthly 11. How much is the adjusted loss on repossession?
installments of P20,000 starting November 1, 2017, P115,000 was 12. How much is the total realized gross profit in year 2016?
allowed on the article traded in. The company estimated the
reconditioning cost of this article at P7,400 and a selling price of
P115,000 after such reconditioning cost. The company normally
makes a 24% gross profit on the sale of used articles. The company
employs the perpetual inventory method and using calendar year for
annual reporting.

On April 1, 2018, the customer defaulted in the payment of his


installments. Article A was repossessed and its value to the Company
was estimated at P120,000 after allowing for an estimated
reconditioning cost and the normal profit on resale. The reconditioning
cost for this article is calculated to be 7.50% of its cost after it was
reconditioned.

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