1st Calculate the Gross Profit Rate
= Installment Sales / Cost of Installment Sales
Deferred Gross Profit / Installment Accounts Receivable
2nd Determine Cash Collections
Installment Accounts Receivable Beginning – Installment Accounts Receivable Ending
3rd Check if there is any Repossession
Deduct the Unpaid Balance from the Total in 2nd steps
4th Multiply the Cash Collections by the Gross Profit Rate
How to determine the Net Income with Installment Sales ?
Gross Profit on Regular Sales xxx
Realized Gross Profit on Installment Sales xxx
Total Realized Gross Profit xxx
Operating Expenses (xxx)
Net Income xxx
How to compute Loss on Repossession?
Defaulted Account on Merchandise Repossessed xxx
Multiply by Cost Ratio xxx
Unrecovered Cost xxx
*Compare the Unrecovered Cost to Appraised Market Value of Repossessed Merchandise equals Gain or Loss on Repossession
How to calculate Installment Account Receivable End?
Installment AR Beg xxx
Repossessed Account (xxx)
Write Off (xxx)
Installment AR End xxx