PFRS 15
Revenue Recognition?
1) At a specific point in time
2) Over a period time
Normal Sales / Accrual Method Installment Sales
AR xx Installment AR
Sales xx Sales
COS xx COS
Invty xx Invty
Upon Collection Year-end
Cash xx Sales
AR xx COS
Deferred Gross Profit
Date of Collection
Cash
Installment AR
Deferred Gross Profit
Realized Gross Profit
Basis for Repossession
*Civil Code
Laws governing Installment Sales
Recto Law Maceda Law
*Sale of personal property *Sale of real property
on installment basis on installment basis
*Movable *Immovable
The seller has 3 alternative remedies in case the buyer should default in the payment of at least two installment
in an installment sale of personal property
1) Exact fulfillment with recovery for deficiency
2) Foreclose the chattel mortgage constituted on the thing sold but no recovery for deficiency
3) Cancel the sale
*There will be repossession
*Obligation of the seller is to return the installmet received from the buyer minus reasonable rent.
Measurement of Repossessed Inventory
Estimated Selling Price xx
Less: Cost to Complete (xx)
Cost to Sell (xx)
Normal Profit (based on Estimated Selling Price) (xx)
Estimated Fair Value of the Repossessed Merchandise xx
*Gain or Loss on Repossession is recognized immediately in Profit or Loss
Ex. Aircon, P20,000, payable in 12 mos
xx
xx
xx
xx
xx
xx
eferred Gross Profit xx
xx
stallment AR xx
xx
alized Gross Profit xx
ent of at least two installment
r deficiency
buyer minus reasonable rent.
Installment Contract Receivable / Installment AR
Beg ICR Default
ICR Write off
Installment Sales Collections
End
S Installment Sales
GP = GPR COS COS
Sales GP DGP
Computation of GPR
GPR = DGP
Installment Sales
GPR = DGP
Installment Contract Receivable
Journal Entry for Repossession
Repossessed Merchandise @FMV xx
DGP xx
Loss xx
ICR (Defaulted / Unpaid Bal) xx
Deferred Gross Profit
Beg
DGP Default
DGP Write off
DGP before adjustment
RGP
End
Computation of RGP
Collections X GPR = RGP
*Excluding interest
DGP before Adjustment xx
Less: DGP after RGP (xx)
RGP xx
Repossessed Merchandise xx
Less: Unrecovered Cost (xx)
Gain or Loss on Repossession xx
Unrecovered Cost = Unpaid Balance X Cost Ratio
S 100%
COS 80%
GPR 20%
2) IAR X GPR = DGP
2022 9,728,125 X 32% 3,113,000
2021 3,025,000 X 30% 907,500
4,020,500
1) Collections X GPR = RGP
IAR - 2020
Beg 1,512,500 ICR Default
ICR Write off
Installment Sales 1,512,500 Collections
End 0
IAR - 2021
Beg 8,387,500 ICR Default
ICR Write off
Installment Sales 5,362,500 Collections
End 3,025,000
IAR - 2022
Beg 12,890,625 ICR Default
ICR Write off
Installment Sales 3,162,500 Collections
End 9,728,125
S 12,890,625 100%
COS 8,765,625 68%
GP 32%
Collectons GPR
2020 1,512,500 28% 423,500
2021 5,362,500 30% 1,608,750
2022 3,162,500 32% 1,012,000
3,044,250
PFRS 15
1)
12,890,625
32%
4,125,000
2) Zero
GPR
2020 42%
2021 37.5% S 125%
2022 20% COS 100%
GP 25% 20%
IAR - 2020
Beg 180,000 ICR Default
ICR Write off
Installment Sales 180,000 Collections
End 0
IAR - 2021
Beg 576,000 26,400 ICR Default
ICR Write off
Installment Sales 405,600 Collections
End 144,000
64,800
(38,400)
Defaulted 26,400
IAR - 2022
Beg 1,800,000 ICR Default
ICR Write off
Installment Sales 1,020,000 Collections
End 780,000 2020
2021
2022
360,000 RGP on Installment Sales
20% Cash Sales (1,400,000 x 30%)
1,800,000 Credit Sales (400,000 x 32%)
Repossession Repossessed Mdse (16,250 x 40
Repossessed Merchandise @FMV 12,000 Total RGP
DGP 9,900
Loss 4,500
ICR (Defaulted / Unpaid Bal) 26,400 PFRS 15
Installment Sales - 2022
Cash Sales (1,400,000 x 30%)
Repossessed Merchandise 12,000 Credit Sales (400,000 x 32%)
Less: Unrecovered Cost (16,500)
Gain or Loss on Repossession (4,500) Repossessed Mdse (16,250 x 20
Unrecovered Cost = 26,400 X 62.5%
Repossession
Repossessed Merchandise @FM
Selling Price 16,250 Loss
COS (12,000 + 1,000) (13,000)
3,250 20%
Collections GPR
180,000 42% 75,600
405,600 37.5% 152,100
1,020,000 20% 204,000
GP on Installment Sales 431,700
sh Sales (1,400,000 x 30%) 420,000
edit Sales (400,000 x 32%) 128,000
979,700
possessed Mdse (16,250 x 40% x 20%) 1,300
981,000
stallment Sales - 2022 1,800,000 x 20% 360,000
sh Sales (1,400,000 x 30%) 420,000
edit Sales (400,000 x 32%) 128,000
908,000
possessed Mdse (16,250 x 20%) 3,250
911,250 1)
possession
possessed Merchandise @FMV 12,000
14,400 2)
ICR (Defaulted / Unpaid Bal) 26,400
Sales 84,000 SP 84,000
COS 54,600 DP (9,000)
GP 29,400 35% Bal 75,000
Payment Int Inc Bal
4/1/2021 75,000
4/30/2021 7,500 1500 6,000 69,000
5/30/2021 7,500 1380 6120 62880
6/30/2021 7,500 1258 6242 56638
7/30/2021 7,500 1133 6367 50270
5270 24,730
Collection
Repossession
Repossessed Merchandise @FMV 22,500
DGP 17,595
Loss 10,176
ICR (Defaulted / Unpaid Bal) 50,270
Repossessed Merchandise 22,500
Less: Unrecovered Cost (32,676)
Gain or Loss on Repossession (10,176)
Unrecovered Cost = 50,270 X 65.0%
Collections:
DP 9,000
Payment 24,730
33,730
35%
RGP 11,805
RGP 11,805
Loss (10,176)
Int Inc 5270
Net Income 6,900
Sales 400,000 SP 400,000
COS 300,000 DP (100,000)
GP 100,000 25% T-in (50,000)
Balance 250,000
Collections Initial inst Sales 400,000
DP 100,000 Underallowance 100,000
Trade-in 150,000 Adj Inst Sales 500,000
Balance 50,000 COS (300,000)
300,000 GP 200,000
40%
120,000 GPR 40%
Repossession
Repossessed Merchandise @FMV 110,000
DGP 80,000
Loss 10,000
ICR (Defaulted / Unpaid Bal) 200,000
Selling Price 140,000
COS (110,000 + 10,000) (120,000)
20,000
