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Installment Sales and Profit Analysis

This document summarizes the sale of an item with an installment payment plan. It shows the original sales price was $1,218,000 but was adjusted to $1,130,500 due to an overallowance on a trade-in. The cost of the item was $700,000, resulting in a gross profit of $430,500. It then lists the monthly installment payments of $25,500 over 14 months, calculating the present value as $767,805. It records the cash receipts and calculates the interest income earned each month.

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Paula Bautista
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83 views4 pages

Installment Sales and Profit Analysis

This document summarizes the sale of an item with an installment payment plan. It shows the original sales price was $1,218,000 but was adjusted to $1,130,500 due to an overallowance on a trade-in. The cost of the item was $700,000, resulting in a gross profit of $430,500. It then lists the monthly installment payments of $25,500 over 14 months, calculating the present value as $767,805. It records the cash receipts and calculates the interest income earned each month.

Uploaded by

Paula Bautista
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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PROBLEM 7-4

1 Selling Price 350,000.00


Less: Reconditioning cost (50,000.00)
Cost to Sell (17,500.00)
Normal Profit (70,000.00)
NRV of the Trade In Item 212,500.00
Allowance Allowed 300,000.00
Overallowance (87,500.00)

Original Sales Price 1,218,000.00


Less: Overallowance (87,500.00)
Adjusted Sales 100.00% 1,130,500.00
Less: Cost 72.00% (700,000.00)
Gross Profit 28.00% 430,500.00

Monthly Installment 25,500.00


Multiply by: 30.11
Present Value of the Balance 767,805.00

Collection Interest Principal Balance


11/01/2017 - - - 767,805.00
12/01/2017 25,500.00 7,678.05 17,821.95 749,983.05
01/01/2018 25,500.00 7,499.83 18,000.17 731,982.88
02/01/2018 25,500.00 7,319.83 18,180.17 713,802.71
03/01/2018 25,500.00 7,138.03 18,361.97 695,440.74
04/01/2018 25,500.00 6,954.41 18,545.59 676,895.14
05/01/2018 25,500.00 6,768.95 18,731.05 658,164.10
06/01/2018 25,500.00 6,581.64 18,918.36 639,245.74
07/01/2018 25,500.00 6,392.46 19,107.54 620,138.19
08/01/2018 25,500.00 6,201.38 19,298.62 600,839.58
09/01/2018 25,500.00 6,008.40 19,491.60 581,347.97
10/01/2018 25,500.00 5,813.48 19,686.52 561,661.45
11/01/2018 25,500.00 5,616.61 19,883.39 541,778.07
12/01/2018 25,500.00 5,417.78 20,082.22 521,695.85
01/01/2019 25,500.00 5,216.96 20,283.04 501,412.80

Installment Sales 767,805.00


Downpayment 212,500.00
Interest Revenue 22,497.71
Total Revenue to be recognized 1,002,802.71

2 10/01/2018 Trade In 300,000.00


Installment Receivable 918,000.00
Installment Sales 1,067,805.00
Discount on Installment Sales 150,195.00
To record sales.

11/01/2018 Cash 25,500.00


Discount on Installment Sales 7,678.05
Installment Receivable 25,500.00
Interest Income 7,678.05
To record collection and interest.

12/01/2018 Cash 25,500.00


Discount on Installment Sales 7,499.83
Installment Receivable 25,500.00
Interest Income 7,499.83
To record collection and interest.

12/31/19 Installment Sales 87,500.00


Overallowance 87,500.00

Overallowance 87,500.00
Trade In 87,500.00

01/01/2019 Cash 25,500.00


Discount on Installment Sales 7,319.83
Installment Receivable 25,500.00
Interest Income 7,319.83
To record collection and interest.

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