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     81.     Seeman Furniture uses the installment-sales method. No further collections could be made on an account with a balance of $18,000. It was estimated that the repossessed furniture could be sold as is for $5,400, or for $6,300 if $300 were spent reconditioning it. The gross profit rate on the original sale was 40%. The loss on repossession was
a.     $4,800.
b.     $4,500.
c.     $12,000.
d.     $12,600.

     82.     Wagner Company sold some machinery to Granger Company on January 1, 2007. The cash selling price would have been $568,620. Granger entered into an installment sales contract which required annual payments of $150,000, including interest at 10%, over five years. The first payment was due on December 31, 2007. What amount of interest income should be included in Wagner's 2008 income statement (the second year of the contract)?
a.     $15,000
b.     $47,548
c.     $30,000
d.     $41,862

     83.     Lamberson Company has used the installment method of accounting since it began operations at the beginning of 2008. The following information pertains to its operations for 2008:
Installment sales     $ 1,400,000
Cost of installment sales     980,000
Collections of installment sales     560,000
General and administrative expenses     140,000
The amount to be reported on the December 31, 2008 balance sheet as Deferred Gross Profit should be
a.     $168,000.
b.     $252,000.
c.     $336,000.
d.     $840,000.

     84.     Maris, Inc. appropriately used the installment method of accounting to recognize income in its financial statement. Some pertinent data relating to this method of accounting include:
     2007     2008
Installment sales     $750,000     $900,000
Cost of sales      450,000      630,000
Gross profit     $300,000     $270,000
Collections during year:
On 2007 sales     250,000     250,000
On 2008 sales          300,000
What amount to be realized gross profit should be reported on Maris’s income statement for 2008?

a.     $165,000
b.     $190,000
c.     $220,000
d.     $270,000

     85.     Singer Company sells plasma-screen televisions on an installment basis and appropri-ately uses the installment-sales method of accounting. A customer with an account balance of $5,600 refuses to make any more payments and the merchandise is repossessed. The gross profit rate on the original sale is 40%. Singer estimates that the television can be sold as is for $1,750, or for $2,100 if $140 is spent to refurbish it. The loss on repossession is
a. $3,850.
b. $2,240.
c. $1,610.
d. $1,400.

Use the following information for questions 86-88.

During 2008, Steele Corporation sold merchandise costing $1,500,000 on an installment basis for $2,000,000. The cash receipts related to these sales were collected as follows: 2008, $800,000; 2009, $700,000; 2010, $500,000.

     86.     What is the rate of gross profit on the installment sales made by Steele Corporation during 2008?
a.     75%
b.     60%
c.     40%
d.     25%

     87.     If expenses, other than the cost of the merchandise sold, related to the 2008 installment sales amounted to $90,000, by what amount would Steele’s net income for 2008 increase as a result of installment sales?
a.     $110,000
b.     $177,500
c.     $200,000
d.     $710,000

     88.     What amount would be shown in the December 31, 2009 financial statement for realized gross profit on 2008 installment sales, and deferred gross profit on 2008 installment sales, respectively?
a.     $175,000 and $375,000
b.     $325,000 and $175,000
c.     $375,000 and $125,000
d.     $175,000 and 125,000

     89.     On January 1, 2007, Dole Co. sold land that cost $210,000 for $280,000, receiving a note bearing interest at 10%. The note will be paid in three annual installments of $112,595 starting on December 31, 2007. Because collection of the note is very uncertain, Dole will use the cost-recovery method. How much revenue from this sale should Dole recognize in 2007?

a.     $0
b.     $21,000
c.     $28,000
d.     $70,000

     *90.     On April 1, 2007 Reagan, Inc. entered into a franchise agreement with a local business-man. The franchisee paid $240,000 and gave a $160,000, 8%, 3-year note payable with interest due annually on March 31. Reagan recorded the $400,000 initial franchise fee as revenue on April 1, 2007. On December 30, 2007, the franchisee decided not to open an outlet under Reagan's name. Reagan canceled the franchisee's note and refunded $128,000, less accrued interest on the note, of the $240,000 paid on April 1. What entry should Reagan make on December 30, 2007?
a.     Loss on Repossessed Franchise          128,000
          Cash               128,000
b.     Loss on Repossessed Franchise          118,400
          Cash               118,400
c.     Loss on Repossessed Franchise          278,400
          Cash               118,400
          Note Receivable               160,000
d.     Revenue from Franchise Fees          400,000
          Interest Income               9,600
          Cash               118,400
          Note Receivable               160,000
          Revenue from Repossessed Franchise               112,000

     *91.     On January 1, 2007 Tasty Delight, Inc. entered into a franchise agreement with a company allowing the company to do business under Tasty Delight's name. Tasty Delight had performed substantially all required services by January 1, 2007, and the franchisee paid the initial franchise fee of $560,000 in full on that date. The franchise agreement specifies that the franchisee must pay a continuing franchise fee of $48,000 annually, of which 20% must be spent on advertising by Tasty Delight. What entry should Tasty Delight make on January 1, 2007 to record receipt of the initial franchise fee and the continuing franchise fee for 2007?
a.     Cash          608,000
          Franchise Fee Revenue               560,000
          Revenue from Continuing Franchise Fees               48,000
b.     Cash          608,000
          Unearned Franchise Fees               608,000
c.     Cash          608,000
          Franchise Fee Revenue               560,000
          Revenue from Continuing Franchise Fees               38,400
          Unearned Franchise Fees               9,600
d.     Prepaid Advertising          9,600
     Cash          608,000
          Franchise Fee Revenue               560,000
          Revenue from Continuing Franchise Fees               48,000
          Unearned Franchise Fees               9,600

     *92.     Yount Inc. charges an initial franchise fee of $920,000, with $200,000 paid when the agreement is signed and the balance in five annual payments. The present value of the future payments, discounted at 10%, is $545,872. The franchisee has the option to purchase $120,000 of equipment for $96,000. Yount has substantially provided all initial services required and collectibility of the payments is reasonably assured. The amount of revenue from franchise fees is
a.     $200,000.
b.     $721,872.
c.     $745,872.
d.     $920,000.

Use the following information for questions 93 and 94.

On May 1, 2007, TV Inc. consigned 80 TVs to Al's TV. The TVs cost $270. Freight on the shipment paid by Al’s TV was $600. On July 10, TV Inc. received an account sales and $12,900 from Al's TV. Thirty TVs had been sold and the following expenses were deducted:
Freight     $600
Commission (20% of sales price)     ?
Advertising     390
Delivery     210

     *93.     The total sales price of the TVs sold by AL's TV was
a.     $15,375.
b.     $16,125.
c.     $16,388.
d.     $17,625.

     *94.     The inventory of TVs will be reported on whose balance sheet and at what amount?
          Balance Sheet of      Amount of Inventory
a.          TV Inc.     $13,875
b.          TV Inc.     $13,500
c.          Al's TV     $13,875
d.          Al's TV     $13,500

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