EXERCISE 18-18 (10-15 minutes)

1.     Repossessed Merchandise..........................................        800

        Deferred Gross Profit.....................................................        378*

        Installment Accounts Receivable................................                      1,080**

        Gain on Repossession..................................................                           98

        **$378 = 35% X $1,080

        **Selling price                                                       $1,800

        Down payment (20%)                                              (360 )

        1,440

        Installment payments (4/16 X $1,440)                  (360 )

        Installment accounts receivable balance      $1,080

2.     Repossessed Merchandise..........................................        750

        Deferred Gross Profit......................................................       220*

        Installment Accounts Receivable                                                         880**

        Gain on Repossession..................................................                            90

        **($1,600 – $1,200)/$1,600 = 25% gross profit rate;

        $220 = 25% X $880

        **Selling price                                                       $1,600

           Down payment                                                      (240 )

                                                                                          1,360

        Monthly payments ($80 X 6)                                   480

        Installment accounts receivable balance       $   880