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

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

Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter17: Advanced Issues In Revenue Recognition
Section: Chapter Questions
Problem 19E: Rix Company sells home appliances and provides installation and service for its customers. On April...
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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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