What is the loss on repossession for the year ended December 31, 2022? On January 1, 2021, an entity sold a car to a customer at a price of P 400,000 with a production cost of P 300,000. It is the entity's policy to employinstallment method to recognize gross profit from installment sales.At the time of sale, the entity received cash amounting to 25% of the selling price and old car with trade-in allowance of P 50,000. The said old car has fairvalue of P 150,000. The customer issued a 5-year note for the balance to be payable on equal annual installments every December 31 starting 2021. Thenote payable is interest-bearing with 10% rate due on the remaining balance of the note.The customer was able to pay the first annual installment and corresponding interest due. However, after the payment of the second interest due, thecustomer defaulted on the second annual installment which resulted to the repossession of the car sold with appraised value of P 110,000. On December31, 2022, the repossessed car was resold for P 140,000 after reconditioning cost of P 10,000.

Loss on repossession is the loss on the sale of goods that are taken back because of non-payment of…

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Business

Accounting

What is the loss on repossession for the year ended December 31, 2022?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

What is the loss on repossession for the year ended December 31, 2022?

On January 1, 2021, an entity sold a car to a customer at a price of P 400,000 with a production cost of P 300,000. It is the entity's policy to employ
installment method to recognize gross profit from installment sales.
At the time of sale, the entity received cash amounting to 25% of the selling price and old car with trade-in allowance of P 50,000. The said old car has fair
value of P 150,000. The customer issued a 5-year note for the balance to be payable on equal annual installments every December 31 starting 2021. The
note payable is interest-bearing with 10% rate due on the remaining balance of the note.
The customer was able to pay the first annual installment and corresponding interest due. However, after the payment of the second interest due, the
customer defaulted on the second annual installment which resulted to the repossession of the car sold with appraised value of P 110,000. On December
31, 2022, the repossessed car was resold for P 140,000 after reconditioning cost of P 10,000.

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