Accounting for Special Transactions

Final Examination

5. – 6: Correcting Entries as of December 31, 2021:

5) Inventory- Repossessed Merchandise P 25,000
Deferred Gross Profit 24,000
Loss on repossession 11,000
Installment receivable P 60,000
To record repossession

6) Deferred Gross profit 24,000

Inventory- Repossessed Merchandise 25,000
Allowance for doubtful accounts 49,000
Correction of entry

10. Make the entry to record the sale on July 1, 2021.

2020 Inventory- merchandise traded-in P 20,000
Dec 31 Installment Accounts receivable 430,000
Under Allowance P 4,000
Installment Sales 446,000
To record installment sales

37. Make the entry to record transaction (b) in the books Cebu Branch.

Investment in Bacolod Branch P 34,300

Sales Discount 700
Accounts receivable P 35,000
Collected receivable by Bacolod Branch

38. Make the entry to record transaction (c) in the books Cebu Branch.

Travel expense P 37,500

Home Office P 37,500
Travel expense paid

39. Make the entry to record transaction (e) in the books Bacolod Branch.
Shipments from Home Office P 250,000
Freight In 4,200
Home Office P 252,700
Cash 1,500
Merchandise from Cebu and freight cost

40. Make the entry to record transaction (e) in the books of the Home Office
Investment in Bacolod Branch P 252,700
Loss on freight 300
Investment in Cebu Branch P 253,000
Merchandise shipped and freight cost

Shipment to Cebu Branch 250,000

Shipment to Bacolod Branch 250,000
Merchandise shipped
Supporting Computations:
1. 24%
GPR based on sales [(1,500,000-960,000)/ 1,500,000)] 36%

GPR on installment sales- 2020 (36%- 81%-4%) 24%

4. A. 504,000
2019 2020
Installment Accounts Receivable- 2019 sales P 800,000 P 2,000,000
Installment Accounts Receivable- 2020 sales (250,000) (950,000)
Total 550,000 1,050,000
Credits for Repossession (60,000) -
Collections 490,000 1,050,000
Gross Profit Rate (Schedule 1) 40% 48%
Realized Gross Profit- Dec. 31, 2020 P 196,000 P 504,000

Schedule 1:
2019 Sales
Installment Sales P 1,500,000
Cost of Sales :
Purchases P 1,000,000
Merchandise Inventory (100,000) (900,000)
Gross Profit P 600,000
Gross profit Rate (P600,000 / P 1,500,000) 40%

2020 sales
Adjusted Installment Sales P 2,000,000
Cost of Sales:
Purchases P 1,200,000
Merchandise Inventory 100,000
Goods Available for sale P 1,300,000
Merchandise Inventory- end 260,000 1,040,000
Gross Profit P 960,000
Gross Profit rate (P 960,000 / P 2,000,000) 48%

7. A. P 20,000
Estimated Selling Price P 28,000
Less: Reconditioning cost P 3,800
10% Gross Profit 2,800
5% Sales Commission 1,400 8,000
FV of Repossessed machine P 20,000
Trade-in value 16,000
Under Allowance P 4,000

8. C. 30%
Installment Sales P 446,000
Add: Under Allowance 4,000
Installment Sales- Adjusted P 450,000
 Less: Cost of Sales 315,000
Gross Profit P 135,000

Gross Profit rate (P135,000/ P 446,000) 30%

9. C. P 78,000
Trade-in Merchandise – fair value P 20,000
Collections:
Downpayments P 50,000
Installment collections (Schedule 1) 190,000 240,000
Total P 260,000
Multiply by: Gross Profit Rate 30%
Realized Gross Profit P 78,000

Schedule 1:
Installment Sales as adjusted P 450,000
Less: Downpayments P 50,000
Trade-in merchandise – fair value 20,000 70,000
Installment Collections (380 000/10 =38,000x5 = 190 000) P 380,000

11. P 390,000
Merchandise Inventory, 1/1 P 52,500
Purchases 390,000
Freight In 3,000
Repossessed merchandise 15,000
Cost of Goods Available for sale P 460,500
Merchandise inventory, 12/31 (70,500)
Cost of goods Sold P 390,000

12. P 41,000
Installment receivable- 2019, beg P 74,000
Installment receivable-2019, end (15,000)
Difference P 59,000
Repossession (18,000)
Collections P 41,000

13. P 57,000
Installment receivable-2020, beg P 123,000
Installment receivable- 2020, end (45,000)
Difference P 78,000
Repossession (21,000)
Collections P 57,000

14. P 176, 400

Installment sales- 2021 P 446,400
Installment receivable (270,000
Collections P 176,400
15. D. P 167,647
Balance remitted P 136,500
Add: Marketing expenses 1,500
Delivery and installation 3,000
Cartage cost 1,500
Balance before commission P 142,500
Add: commission (142,500 x 15/85) 25,147
Total P 167,647

16. D. 25,147
Commission (167,647 x 15%) P 25,147

17. D. 16,500
Consignor’s net profit
Balance remitted P 136,500
Less: Freight cost (12,000)
Cost of consigned goods (108,000)
Net profit P 16,500

18. P115, 200

Cost (18,000 x6) P 108,000

Add: Freight cost [(12,000/100) x 6] 72,000
Inventory P 115,000

19. 35%
Total cost incurred to date P 4,200,000
Estimated cost to complete 7,800,000
Total estimated cost to complete P 12,000,000
Percentage of completion (4,200,000/12,000,000) 35%

20. B. 5,250,000
Contract price P 15,000,000
Less: Total estimated costs 12,000,000
Estimated gross profit P 3,000,000
Percentage of completion 35%
Gross profit earned to date P 1,050,000
Actual cost incurred (7,100,000 x 30%) 4,200,000
Revenue- 2020 P 5,250,000

21. 85%
Total cost incurred to date P 9,860,000
Estimated cost to complete 1,740,000
Total estimated cost to complete P 11,600,000
Percentage of completion (9,860,000/11,600,000) 85%

22. A. P 1,840,000
Contract price P 15,000,000
Less: Total estimated costs 11,600,000
Estimated gross profit P 3,400,000
 Percentage of completion 85%
Gross profit earned to date P 2,890,000
Less: Realized gross profit- prior year 1,050,000
Realized gross profit- 2021 P 1,840,000

23. B. P 284,000
2020 2021
Contract price P 6,600,000 P 6,600,000
Reduction due to delay ____________ ____________
Net contract price P 6,600,000 P 6,600,000
Less: Total estimated cost
Cost incurred each year P 1,782,000 P 3,850,000
Estimated costs to complete 3,618,000 1,650,000
Total P 5,400,000 P 5,500,000
Estimated gross profit P 1,200,000 P 1,100,000
Percentage of completion 33% 70%
Realized profit to date P 396,000 P 770,000
Realized gross profit in prior years - 396,000
Realized gross profit this year P 396,000 P 374,000

Realized gross profit P 374,000

Less: Operating expense 90,000
Net income- 2021 P 284,000

24. D. P 750,000
Cost incurred to date P 3,850,000
Realized gross profit to date -
Construction in progress (cumulative) P 3,850,000
Progress billings 3,100,000
Construction in progress- net P 750,000

25. A. P 400
Excess freight on transfer of merchandise [(P 500 + P 700) – P800)] P 400

28. P 3,250,000
Branch inventory ending, at cost
Acquired from home office (525,000/140%) P 375,000
Less: Local purchase 175,000
Total P 200,000

Shipment from home office 2,450,000

Local purchases 1,000,000
Cost of goods available for sale P 3,450,000
Branch inventory, ending 200,000
Cost of sales P 3,250,000

29. P 115,000
Sales P 405,000
 Cost of goods sold
Inventory, beg -
Purchases P 125,000
Shipment from home office (100,000x130%) 130,000
Goods available for sale P 255,000
Less: Inventory, end (125,000 x 64%) 80,000 175,000
Gross profit P 230,000
Expense 115,000
Net income P 115,000

30. P 14,285
Sales [291,600 (100% - 35%) (100% - 20%)] P 236,925
Sales discount [82,175/ (100% -5%) (5%)] (4,325)
Cost of sales (189,540)
Gross profit P 43,060
Operating expenses:
Rent expense (70,200/12x3) (17,550)
Advertising expense (4,650)
Utilities (6,300)
Depreciation (11,000 x 15% x 2/12) (275)
Net income P 14,285

31. P 94,500
Billing Price Cost Unrealized Profit
(Billing/1.35) (Billing price-Cost)
Inventory- Dec 1 P 162,000 P 120,000 P 42,000
Shipment during December 202,500 150,000 52,500
Available for sale before adj. P 364,500 P 270,000 P 94,500

32. P 131,600
Billed Price Cost (120%) Overvaluation
Inventory, January 1 P 33,600 P 28,000 P 5,600
Shipments (840,000 – 48,000) 792,000 660,000 132,000
Goods available for sale P 137,600
Inventory, December 31 36,000 30,000 6,000
Allowance P 131,600

33. P 180,250
Billed Price Cost (120%) Overvaluation
Inventory, January 1 P 315,000 P 252,000 P 63,000
Shipments from home office 980,000 784,000 196,000
Total P 259,000
Unrealized profit account 30,000 78,750
Cost of goods sold- overstated P 180,250

34. P 431,800
Home Office Branch
 Unadjusted balance P 452,300 Squeeze P 412,600
Check paid by Branch (12,000)
Ship in transit 25,000
Error in advertising expense (8,500) (5,800)
Adjusted balances P 431,800 P 431,800

35. P 271,800
Collections of Cebu Branch Receivable, net (35,000 x 98%) P 34,300
Travel expense (250,000 x 15%) 37,500
Merchandise shipped, at cost 200,000
Balance of investment in Cebu Branch account in HO books P 271,800

36. P 374,800
Fund transfer from Cebu branch P 25,000
Collections of Cebu branch receivable, net (35,000 x 98%) 34,300
Travel expense (250,000 x 125%) 62,500
Merchandise shipped (250,000 x 125%) 250,000
Freight in 4,500
Less: Payment for ship 1,500
Balance of Home Office account in Bacolod Branch Books P 374,800