How much is the gain or loss on repossession

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Reference no: EM133034198

Question - AAA Company sold a Ford Escape car costing P620,280 for P960,000 on August 1, 2020. A used car is accepted as a downpayment, P250,000 being allowed on the trade in and the balance is payable in 20 months plus 1% a month on diminishing balance starting August 31, 2020. The used car can be resold for P190,000 after reconditioning cost of P10,000. The company's gross profit rate on the sale of used car is 15%. After making religious payments in 2020, the customer defaulted and the vehicle was repossessed on December 5, 2020. Toyota Motors estimated that the market value of the repossessed vehicle is P300,000 after reconditioning costs of P25,000. The gross profit rate of 15% is also applicable to repossessed cars.

Required -

1. How much is the Over (Under) Allowance?

2. How much is the Gain or Loss on Repossession?

3. How much is the balance of the Trade In and the Repossessed Item?

4. Revenue and Net income to be recognized?

Reference no: EM133034198

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