On January 1, 2020, an entity sold a new car at a price of P1,000,000 with production cost of P900,000. At the time contract signing, the entity received P100,000 cash and old car as down payment. The entity gave a trade-in allowance of P300,000 to the old car although its fair market value on January 1, 2020 is P500,000. The remaining balance is payable in six equal monthly installments starting February 1, 2020. The buyer religiously paid the monthly installments starting February 1, 2020. However, on June 1, 2020, the buyer defaulted on the monthly installment due which resulted to the cancellation of the contract of sale and repossession of the subject car. At the date of repossession, the repossessed car was appraised at a fair value of P130.000. It is the policy of the entity to use installment method to account its credit sales. 11. What is the realized gross profit to be recognized by the entity for the year ended December 31, 2020? 12. What is the loss on repossession to be recognized by the entity for the year ended December 31, 2020?
On January 1, 2020, an entity sold a new car at a price of P1,000,000 with production cost of P900,000. At the time contract signing, the entity received P100,000 cash and old car as down payment. The entity gave a trade-in allowance of P300,000 to the old car although its fair market value on January 1, 2020 is P500,000. The remaining balance is payable in six equal monthly installments starting February 1, 2020. The buyer religiously paid the monthly installments starting February 1, 2020. However, on June 1, 2020, the buyer defaulted on the monthly installment due which resulted to the cancellation of the contract of sale and repossession of the subject car. At the date of repossession, the repossessed car was appraised at a fair value of P130.000. It is the policy of the entity to use installment method to account its credit sales. 11. What is the realized gross profit to be recognized by the entity for the year ended December 31, 2020? 12. What is the loss on repossession to be recognized by the entity for the year ended December 31, 2020?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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On January 1, 2020, an entity sold a new car at a price of P1,000,000 with production cost of P900,000. At the time contract signing, the entity received P100,000 cash and old car as down payment. The entity gave a trade-in allowance of P300,000 to the old car although its fair market value on January 1, 2020 is P500,000. The remaining balance is payable in six equal monthly installments starting February 1, 2020.
The buyer religiously paid the monthly installments starting February 1, 2020. However, on June 1, 2020, the buyer defaulted on the monthly installment due which resulted to the cancellation of the contract of sale and repossession of the subject car. At the date of repossession, the repossessed car was appraised at a fair value of P130.000. It is the policy of the entity to use installment method to account its credit sales. 11. What is the realized gross profit to be recognized by the entity for the year ended December 31, 2020?
12. What is the loss on repossession to be recognized by the entity for the year ended December 31, 2020?
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