Explain what is realized gross profit on installment sales

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Reference no: EM132680905

On July 1, 2016, MUSCALA Motors, which maintains a perpetual inventory records sold a new automobile to LAX for P 1,700,000. The car costs the seller P 1,301,250. The following were the payment scheme in order:

30% down payment
P 160,000 allowance on an old car traded
The balance being payable in equal monthly installments

The monthly amortization amounts to P 60,000 inclusive of 12% interest on the unpaid amount of the obligation. The car traded in has a wholesale value of P 240,000 after expending reconditioning costs of P 45,000. After paying three installments, the buyer suffered major financial setback incapacitating him to continue paying so the car was subsequently repossessed.

Problem 1: When reacquired, the car was appraised to have a fair value of P 600,000. What is the realized gross profit on installment sales during the year?

Reference no: EM132680905

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