Reference no: EM132777674
Questions -
Q1. KCP Inc. sells cellphones on an installment basis. For the year ended December 31, 2016, the following were reported:
Cost of installment sales P 1,050,000
Loss on repossessions 27,000
Fair value of repossessed merchandise 225,000
Account defaulted 360,000
Deferred Gross Profit, December 31 Adjusted 216,000
What is the collections during the year?
Q2. BULLOCK Inc. sells automatic weapons costing P 700,000 at a price of P 1,200,000. CARUSO Corp. buys a dozen of automatic weapons on installment and trade-in six of its old weapons at a trade-in value of P 300,000 each. BULLOCK spends P 25,000 to recondition the old guns and sells them for P 315,000. BULLOCK expects a 10 percent gross profit from the sale of used guns. What is the over-allowance granted by BULLOCK on the trade-in transaction?
Q3. On March 1, 2016, the GABRIEL Company sold machine for P 155,000. The machine costs P 100,000. The customer is allowed a trade-in allowance of P 50,000 for an old machine. A down payment of P 45,000 was made and the balance is to be paid in 12 monthly installments of P 5,000 each payable at the end of each month beginning March 31.
The old machine is estimated to have a resale value of P 70,000 after incurring a reconditioning cost of P 7,500. The seller expects a 20% profit from the sale of used machine; commission is 5%.
1. What is the fair market value of the machine received?
2. What is the gross profit rate?
3. What is the correct adjusted entry to record the installment sales?