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Omega Corp Sales and Profit Analysis

1. The document outlines transactions for Omega Corporation for years 20x4 and 20x5, including regular and installment sales, collections, expenses, and adjusting entries. 2. Adjusting entries include recognizing accrued interest receivable, setting up deferred gross profit for installment sales, and realizing gross profit on collections received for installment sales. 3. Closing entries include closing out income statement accounts to retained earnings.

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32 views5 pages

Omega Corp Sales and Profit Analysis

1. The document outlines transactions for Omega Corporation for years 20x4 and 20x5, including regular and installment sales, collections, expenses, and adjusting entries. 2. Adjusting entries include recognizing accrued interest receivable, setting up deferred gross profit for installment sales, and realizing gross profit on collections received for installment sales. 3. Closing entries include closing out income statement accounts to retained earnings.

Uploaded by

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

PROBLEM IV

Transactions and entries for the Omega Corporation relating to regular and installment sales for 20x4 and 20x5 follow:
REQUIREMENT NO.1

January to December 31 20x4 20x5


1)To record the regular sales:
Cash 360,000 480,000
Accounts Receivable 240,000 600,000
Sales 600,000 1,080,000

2) To record the installment sale:


Cash 60,000 144,000
Installment accounts receivable 300,000 336,000
Installment sales 360,000 480,000

3) To record cost of sales


Periodic Method - no entry

Perpetual Method
*Regular Sales:
Cost of Sales 480,000 864,000
Merchandise Inventory 480,000 864,000

*Installment Sales:
Cost of Installment Sales 252,000 312,000
Merchandise Inventory 252,000 312,000

4) To record collections
*Regular Sales
Cash 144,000 360,000
Accounts Receivable 144,000 360,000

*Installment Sales
Cash 108,000 204,000
Installment Accounts Receivable 20x4 72,000 72,000
Installment Accounts Receivable 20x5 60,000
Interest Income 36,000 72,000

5) To record payment of operating expenses:


Operating expenses 90,000 102,000
Cash 90,000 102,000
for 20x4 and 20x5 follow:
REQUIREMENT NO. 2
Adjusting entries (end of the year)
6) To recognize accrued interest receivable
Interest receivable
Interest Income

7) To set up Cost of Installment Sales


Periodic Method:
Cost of Installment Sales
Merchandise Inventory

Perpetual Method: No entry

8) To set-up Deferred Gross Profit


Installment Sales
Cost of Installment Sales (144,000 + 108,000)
Deferred Gross Profit - 20x4 (360,000 - 252,000)
Deferred Gross Profit - 20x5 (480,000 - 312,000)

Gross Profit Rate - 20x4: 108,000 / 360,000 = 30%


Gross Profit Rate - 20x5: 168,000 / 480,000 =35%

9) To record realized gross profit on installment sales:


Deffered gross profit - 20x4
Deffered gross profit - 20x5
Realized gross profit on installment sales

*20X4 Realized gross profit on installment sales:


Collections applying as to principal (72,000 + 60,000)
Multiplied by: Gross Profit Rate
Realized Gross Profit

** 20x5: Realized gross profit on installment sales: 20x4


Collections - principal 72,000
- 28,800 + 43,200 Multiplied by: Gross Profit rate 30%
Realized Gross Profit 21,600

Closing entries:
10) To close realized gross profit account:
Realized gross profit
Income Summary

11) To close other nominal accounts


Sales
Interest Income 20x4: (36,000 + 1,440) 20x5: (28,800+43,200+1,080+ 1800)
Cost of Sales
Operating Expenses
Income Summary

12) To close operations:


Income Summary
Retained Earnings
20x4 20x5

1,440 2,880
1,440 2,880 1,080 + 1,800

480,000 864,000
480,000 864,000

360,000 480,000
252,000 312,000
108,000
168,000

39,600 21,600
71,400
39600* 93,000**

132,000
30%
39,600

20x5
204,000
35%
71,400 93,000

39,600 93,000
39,600 93,000

600,000 1,080,000
37,440 74,880
480,000 864,000
90,000 102,000
67,440 188,880

107,040 263,760
107,040 263,760

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