TJC recognizes profit on credit sales on an installment basis. At the end of 20x2, before the accounts are adjusted, the ledger shows the following: Installment receivable, 20x1 P675,000 Installment receivable, 20x2 1,050,000 Deferred gross profit, 20x1 P370,000 Deferred gross profit, 20x2 545,000 Regular sales 3,000,000 Cost of regular sales 1,920,000 Each year the gross profit on installment sales was 8% lower than the regular sales. In 20x2, the gross profit on installment sales was 4% higher than 20x1. Compute: Adjusted deferred gross profit balance (DGP) in 20x2 Total realized gross profit (RGP) in 20x2
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
TJC recognizes profit on credit sales on an installment basis. At the end of 20x2, before the accounts are adjusted, the ledger shows the following:
|
Installment receivable, 20x1 |
P675,000 |
|
Installment receivable, 20x2 |
1,050,000 |
|
Deferred gross profit, 20x1 |
P370,000 |
|
Deferred gross profit, 20x2 |
545,000 |
|
Regular sales |
3,000,000 |
|
Cost of regular sales |
1,920,000 |
Each year the gross profit on installment sales was 8% lower than the regular sales. In 20x2, the gross profit on installment sales was 4% higher than 20x1.
Compute:
- Adjusted deferred gross profit balance (DGP) in 20x2
- Total realized gross profit (RGP) in 20x2
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