Installment Sales
Realized Gross Profit - 3 methods, if problem is si/ent, use INSTALLMENT Method.
Collection x Gross Profit Rate
OR
DGP,end - DGP,beg
Net Income: (Current Year= 20x3)
Gross Profit on Regular Sales
Realized Gross Profit on Installment Sales
20x1 (DGP to RGP)
20x2 (Collection-20x3 x GPR-20x2)
20x3 (Collection-20x3 x GPR-20x3)
Total Realized Gross Profit
Less: Expenses
General and Administrative
Selling
Loss on Repossession
Bad Debts
Net Income - 20%3
Dr. Deferred Gross Profit xx
Cr. Realized Gross Profit xx
Loss on Repossession
FV of Repossessed Merch, *
(Est. SP after RC - RC - NP ~ CTS) «x
Unrecovered Cost
Installment AR
Related DGP
Loss on Repossession
*Note: if before RC, ignore
if after RC, deduct
if silent, deduct RC.
Proforma Entries:
1. Writeoff
Dr. Loss on Writeoff xx
Deferred Gross Profit xx
Cr. Installment A/R. xx
2. Adjustment for Realized Gross Profit
Dr. Deferred Gross Profit xx
Cr. Realized Gross Profit xx
3. Collection
Dr. Cash 0
Cr. Installment A/R. x
x
(a) God)
2
For Board Exam Purposes:
Gain on Repossession is part of P/L like
trading securities. (Guerrero)
x
xx
xx
Xx XX
x
xx
pred
x
ed
EE
Journal Entry:
Dr. Repossessed Merch,
DGP-related
Loss on Repossession
Cr. Installment A/R-related
Take Note!
For FV of Traded-in or Repossessed Merch.:
If Wholesale Value is given, the Normal Profit
is IGNORED.
If Appraised Values given, that is the Fair
Value of the
Merch.T-Accounts
Installment A/R — 20x1
Installment A/R — 20x2
Beginning | Collections — 20x2 ‘Adjusted Installment | Collections = 20x2
Repossessed Accts. Sales, net of | Repossessed Accts.
= 20x2 overallowance or | - 20x2
Writeoffs - 20x2, underallowance | Write-offs — 20x2,
rel. 20x41 rel, 20x2
Ending
Deferred Gross Profit — 20x1
Ending
Deferred Gross Profit - 20x2
Beginning Beginning
DGP-Repossessed
Realized Gross Profit oS
DGP-Repossessed Wei
Nehe DGP-Writeoffs
DGP-Writeoffs Unadjusted Bal.
Ending Realized Gross Profit
‘Trade-in
Installment Sales
Overallowance
OR = Underallowance
Adjusted Installment Sales
Cost of Sales
Gross Profit
Ex
EExR
Technique:
Installment Sales
Fair Value of Traded-in Merch.
Trade-in Allowance
Adjusted Installment Sales
Cost of Sales
Gross Profit
BEXEXs
i
Downpayment ~ Cash
Downpayment — FV of Traded-in
Collections, net of Interest
Total Collections
Gross Profit Rate
Realized Gross Profit
Profit on Sale of Repossessed Merch.
Total Realized Gross Profit,
Loss on Repossession
Net Income
de
Adjusted Bal.
} Gross Profit Rate (%)
Take Note!!
If there is a given allowance and gross
profit rate, RECOMPUTE GPR!!
+» Gross Profit Rate (%)
Cost of Sales
Beginning Inventory
Net Purchases
Freight-in
Repossessed Merch. @ FV
Total Goods Available for Sale
Ending Inventory (New +
Repossessed)
Total Cost of Sales
COS-Installment:
COS-Regular
\y EX BR EXLong-term Construction Contracts
(1) Contract Price = Contract Billings
(2) Contract Price
+ Escalation Cost (Increase in Materials)
— De-escalation Cost (Decrease in Materials)
— Penalty Cost (Late Turnover)
+ Incentive Payment (Early Turnover)
+/- Change Orders/Variations
i
(3) Proforma Entries
a. Cost Incurred (Actual)
Dr. Construction in Progress
Cr. Cash
b. To record Progress Billings
Dr. Accounts Receivable
Cr. Progress Billings
c. To record Collections
Dr. Cash
Cr. Accounts Receivable
d. Recognition of Profit or Loss
Dr. Cost of Construction (Eal. Fig.)
Construction in Progress (Profit)
Cr. Cash
Contract Price
Cost Incurred - to Date
Estimated Cost to Complete
Total Cost
Estimated Gross Profit
Percentage of Completion x
Realized Gross Profit ~ to Date
Realized Gross Profit - Prior Years
Realized Gross Profil — Current Year
BExkeme sek
vx
EBxhxomnnk
(4) CPx POC = CIP, if Profit
Note:
Construction in Progress (CIP)
offset Progress Billings under
PASI & 11
CIP account - Inventory
PB account ~ Liability
x
4
|b Percentage of Completion
Note:
If Estimated Gross
Profits NEGATIVE,
recognize it 100%.
ix nw
BExBxbexne x
Under Zero / Cost Recovery Method, Percentage(%) to be used should be either 0% or 100%
(5) (CP x POC) = LTD(1-POC) = CIP, if Loss
(6) TCx POC-LTD = CIP, if Loss
Cost Incurred ~ to Date
Total Cost
OR
—Construction in Progress _
Contract Price
® poc =
TAKE NOTE of this FORMULAI!
Cost Incurred — to Date
+
1
Construction in Progress — to Date
ient
Due from (Dt
Current Assct
~ Current Liability
Duc from Client
Due to Client