Practice Problem: Installment Sales with Repossession

Pacific Corp uses the installment method of reporting. The following date were
gathered for its three years of operations:

2018 2019 2020

Installment Sales 300,000 405,000 495,000
Cost of installment sales 210,000 243,000 321,750
Gross Profit Rate 30% 40% 35%
Balance of installment receivable, Dec 31
2018 installment sales 180,000 135,000 60,000
2019 installment sales 300,000 195,000
2020 installment sales 390,000
In 2020, a customer defaulted; accordingly, the merchandise with an estimated
value of P15,000 was repossessed. The sale was made in 2018 and the unpaid
balance on the date of repossession was P22,500.

Requirements:

a. What is the total realized gross profit in 2020?

b. What is the amount of gain(loss) on repossession in 2020?

Practice Problem: Installment Sales with Trade-In

The Zonyo Company on October 1, 2019, sold article “A” for P4,000, costing P2,700.
Article “B”, a used article was accepted as downpayment and the balance on a
monthly installment payment of P200 starting November 1, 2019. P1200 was allowed
on the article traded-in. The company estimates reconditioning cost of P80 on this
article and a sales price of P1,100 after such reconditioning. The company normally
expects 20% gross profit on sale of used articles. The company employes the
perpetual method of inventory.

On April, 2020, the customer defaulted in the payment of installment. Article “A”
which was sold was repossessed; its value to the seller is P1,350 allowing for
reconditioning cost and a normal gross profit on resale.

Requirements:

a. The amount of realized gross profit in 2019 is?

b. The amount of loss on repossession is?