CASE 1

The data below are taken from the records of True Value Appliance Co. which sells
appliances exclusively on installment basis:
2001 2002 2003
Installment sales P365,500 P417,800 P610,750
Gross profit rate 36% 39% 40%

The balance in the Installment Accounts Receivable controlling accounts at the beginning
and end of 2003 were:
January 1 December 31
2001 P17,400 -
2002 205,400 P25,800
2003 - 306,250
There was one repossession recorded during 2003. It related to 2002 sales. Thereafter,
the repossessed appliance was sold for P200, which equaled the uncollected balance in
the customer’s installment account receivable.
1. For the year ended December 31, 2003, the cost of goods sold for True Value
Appliance Co. Amounted to?
2. The gross profit realized in 2003 on collections of 2001 and 2002 installment accounts
receivable totaled?
3. In addition to above realized gross profit, there was also a gain from the sale of the
repossessed appliance of?

CASE 2

Appliance Company reports gross profit on the installment basis. The following data are
available:
2018 2019 2020
 Installment sales 240,000 250,000 300,000

Cost of goods – installment sales 180,000 181,250 216,000

Gross profit 60,000 68,750 84,000

Collections
2018 installment contracts 45,000 75,000 72,500

2019 installment contracts 47,500 80,000

2020 installment contracts 62,500

Defaults
Unpaid balance of 2018 installment contracts 12,500 15,000

Value assigned to repossessed merchandise 6,500 6,000

Unpaid balance of 2019 installment contracts 16,000

Value assigned to repossessed merchandise 9,000

1. What is the realized gross profit before loss on repossession for 2020?
2. What is the loss on repossession for 2020?
 CASE 3

Tigasin Builders Company began its construction activities in 2017. At the

end of its first year’s operation, the following projects (and other relevant
information) are still uncompleted:

Project Contract Billings Collections Actual Est cost

thru costs to
Price 12/31 thru 12/31 thru 12/31 Complete,
12/31
Angeles 15,000,000 10,000,000 9,000,000 12,400,00 3,100,000
City 0
Palo City 17,500,000 5,500,000 5,250,000 3,390,000 13,560,00
0

Tigasin Builders will use the cost-to-cost percentage of completion in

accounting for the Angeles City project, while the cost recovery method
will be used for the Palo City project.

1. Compute the Construction Revenue to be recognized by Tigasin

Builders for the Angeles City project in 2017.

2. Determine how (1) the Angeles City Project and (2) the Palo City
Project will be shown on the year-end balance sheet.
 CASE 4

On January 1, 2018, an entity granted a franchise to a franchisee. The

franchise agreement required the franchisee to pay a nonrefundable upfront
fee in the amount of P400,000 and on-going payment of royalties equivalent
to 5% of the sales of the franchisee. The franchisee paid the nonrefundable
upfront fee on January 1, 2018.
In relation to the nonrefundable upfront fee, the franchise agreement
required the entity to render the following performance obligations:
 To construct the franchisee’s stall with stand-alone selling price of P200,000.
 To deliver 10,000 units of raw materials to the franchisee with stand-
alone selling price of P250,000.
 To allow the franchisee to use the entity tradename for a period of 10
years starting January 1, 2018 with stand-alone selling price of P50,000.
On June 30, 2018, the entity completed the construction of the franchisee’s
stall. On December 31, 2018, the entity was able to deliver 3,000 units of
raw materials to the franchisee. For the year ended December 31, 2018, the
franchisee reported sales revenue amounting to P100,000.
The entity had determined that the performance obligations are separate and
distinct from one another.

1. What is the amount of nonrefundable upfront fee to be allocated to the

construction of the franchisee’s stall?

2. What is the amount of revenue to be recognized in relation to the use

of delivery of raw materials for the year ended December 31, 2018?