ABC Company
Subject:AccountingPrice:2.86 Bought4
ABC Company. uses instalment sales method Of accounting. During the year, a buyer defaulted on an instalment sale leaving ABC Co with no other choice but to repossess the inventory sold. As of the date repossession, the following data are available:
The instalment receivable balance is P240,0000.
Gross profit rate is 30%.
The fair value Of the repossessed inventory after reconditioning costs of P12,000 is P144,000
The normal profit rate is 15%.
How much is the gain (loss) on repossession?
a. 43,200 gain
b. 43,200 loss
c. 36,000 loss
d. 36,000 gain
How much is the new cost basis of the repossessed inventory?
a. 132,000
b. 110,400
c. 144,000
d. 122,400
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(1) Option (c) is correct
(2) New cost basis of the repossessed inventory is the fair value that is 132,000
Option (a) is correct.
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