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
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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.
Transcribed Image Text: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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