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How much is the gain loss on repossession

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Question: ABC Company. uses instalment sales method Of accounting. During the year, a buyer defaulted on an instalment sale leaving ABC Co with no other choice but to repossess the inventory sold. As of the date repossession, the following data are available:

The instalment receivable balance is P240,OOO.
Gross profit rate is 30%.

The fair value Of the repossessed inventory after reconditioning costs of PI 2,000 is P144,OOO. The normal profit rate is 15%.

1. How much is the gain (loss) on repossession?

2. How much is the new cost basis of the repossessed inventory?

Reference no: EM132749523

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