Chapter 10 Problem I 1. The journal entries shown below would be made on the consignor’s and consignee’s books (assume the use of perpetual inventory): Transactions Shipment of goods on consignment.
2. Payment of expenses by consignor. 3. Payment of expenses by consignee. Advances by Consignor
Entries on Consignor’s Books (Herbalife Supplier) Inventory on Consigment…… 60,00 Finished 0 Goods 60,00 Inventory*.... 0
Entries on Consignee’s Books (Conrado Enterprises)
Inventory on Consignment….. Cash……..
No entry
Inventory on Consignment…… Consignee Payable……… Cash……… Advances from Consignee…..
Sale of merchandise
No entry.
6. Notification of sale to consignor and payment of cash due. Commission: 10% x P48,000 = P4,800
Commission expense Advances from Consignee…… Cash……. Consignee Payable Consignment Sales Revenue..
No entry (memorandum entry only)
600 600 Consignor Receivable 2,400
2,400 Cash…………….
3,360 3,360
4,800 3,360 37,44 0 2,400 48,00 0
Advances to Consignor Cash Cash Consignor payable Consignor Payable.. Commission Revenue…….. Consignor Receivable ….. Cash……… Advances from Consignee……
7. To record cost of goods sold and related costs. ** (P60,000 + P600 + P2,400) x ½ = P31,500
Cost of goods sold** Inventory on Consignment
2,400
2,400 3,360 3,360 48,00 0
48,00 0
48,00 0 4,800 2,400 37,44 0 3,360
31,50 0 31,50 0
*if periodic method is used, the credit should be “consignment shipments” account treated as reduction in the Costs of goods available for sale to arrive at Cost of Goods Sold Available for Regular Sale. 2. The remittance amounting to P37,440 can be determined by preparing the Account Sales as follows: Sold for the Account of:
Jingka Juice Sales (60 sachets of herbal goods) Charges: Finishing costs…………………….. Commission (P48,000 x 10%)……………….. Due to Consignor……………………………. Less: Advances………………. Balance………………………… Remittance Enclosed……………… Balance Due…………… Items on Hand (50 sachets of herbal goods): P60,000 x 50%
P48,000 P 2,400 4,800
P30,000
Problem II 1. The account sales: Sold for the Account of: AA Company Sales (8 sets @ P24,000)……………… Charges: Freight-in…………… Advertising expense………… Deliveries and installation expenses Repairs expense – on units sold.. Commissions, 25% of sales Due to Consignor……………………………. Less: Advances………………. Balance………………………… Remittance Enclosed……………… Balance Due…………… Items on Hand………… Items Returned (defective)….…….
7200 P40,800 3,360 P37,440 37,440 P 0
P 192,000 P 6,000 2,400 9,600 4,800 48,000
70,80 0 P121,200 0 P121,200 30,000 P 91,200 15 sets 2 sets
2. The inventory on consignment amounted to P189,000 computed as: Charge Analysis Sales Inventor Total (8 sets) y (25 sets) (15 sets) Charges by consignor: Cost of consigned goods (@P12,000/set) P 96,000 P180,000 P 300,000 Freight-out (P9,000/25 sets = P360 per 3,600* 5,400 9,000 set) Charges by consignee: Freight-in (P6,000/25 sets =P240 per 2,400* 3,600 6,000 set) Advertising expense………….. 2,400 0 2,400 Delivery and installation 9,600 0 9,600 Repairs expense…………… 4,800 0 4,800 Commissions [25% of sales (8 sets x P24,000 per set] 48,000 0 ___48,000 Total P166,800 P189,000 P379,800
* Freight on sets returned is charged against sales of the period. ** Normally, the term “freight-out” is synonymous to “delivery expense” which is classified as selling expenses if we are dealing with a third party. But, for consignment accounting where the transfer of merchandise if from consignor to consignee, the usage of the term “freight-out” does not construed to be a selling expense but still an inventoriable cost (which is part of freight-in). The consignment net income amounted to P25,200 computed as: Consignment Sales (8 sets x P24,000 per set) Less: Costs and expenses: Charges by Consignor: Cost of consigned goods @P12,000/set) P 96,000 Freight-out (P9,000/25 sets = P360 per set) 3,600* Charges by consignee: Freight-in (P6,000/25 sets =P240 per set) P 2,400* Advertising expense………….. 2,400 Delivery and installation 9,600 Repairs expense…………… 4,800 Commissions [25% of sales (8 sets x P24,000 per set] 48,000 Net Income Problem III Summit Electronics Company Inventory on Consignment (800 @ P570) Finished Goods Inventory
456,000
Consignment Expense (P368,000 x 30%) Accounts Receivable--Consignee Sales Sales Revenue—Consignment (P920 x 400)
110,400 257,600
Cost of Consigned Goods Sold (P570 x 400) Inventory on Consignment
228,000
Cash [(P920 x 70%) x 380] Accounts Receivable--Consignee Sales
244,720
P 192,000
99,600
67,200 P 25,200
456,000
368,000 228,000 244,720
Farley Hardware No entry upon receipt of consigned merchandise. Cash (P920 x 400) Consignor Payable Commission Revenue
368,000
Consignor Payable Cash
244,720
257,600 110,400
49. Seahawks, Inc. had the following consignment transactions during December:
244,720
Inventory shipped on consignment to Ashe Company Freight paid by Seahawks Inventory received on consignment from Fenn Company Freight paid by Fenn
P18,000 900 12,000 500
Multiple Choice Problem 1. c – P1,200 Commission = 25% x Sales price P400 = 25% x Sales price Sales price = P400 ÷ 25% = P1,600 Number of units sold = Selling price = __P1,600__ Price per tape P200 per tape
= 8 tapes
Sales ……………………………………………………………….. P1,600 Less Commission of consignee………………………………... 400 Amount remitted by Beta View Store………………………...P1,200 2. a – P 370 Total Charges (25) Consignor’s charges: Cost Freight-out Consignee’s charge - Commission Total Sales price Consignment profit
P2,500 75 __400__ P2,975
Charges Related to Consignment Inventory on Sales Consignment (8) (15) P800 30 __400__ 1,230 _1,600_ _P370_
P1,500 45 _______ _P1,545_
3. a – P1,545 (refer to No. 2 for computation) 4. b Sales (P2,250 / 15%) Divided by: Selling price per unit Number of units sold
P15,000 P 1,000 15 units
Sales Less Charges: Commission Advertising Delivery expense Due to Consignor Less: Advances Value of note – sight draft: (100 beds x P600 per bed) x 60% Multiplied by: Proportional number of beds sold Amount remitted
P15,000
5. c P 2,250 1,500 ___750
__4,500 P10,500
P36,000 15/100
__5,400 P 5,100
6. d – P1,500 Sales Less Charges: Consignor’s charge: Cost of beds (P600 per bed x 15 beds) Consignee’s charges: Commission Advertising Delivery expense Consignment net income 7. a – no items were sold in November; Sales (unknown) Less Charges: Commission Remittance
P15,000 9,000 P2,250 1,500 ___750
P
x
15% x P 27,200
x – 15%x = P27,200 85%x = P27,200 x = P32,000 8. c – P16,800 Sales (unknown) Less Charges: Advertising Delivery and installation charges Commission (unknown) Remittance
x P500 100 20%x
_______ P 12,840
x – (P500 + P100 + 20%x) = P 12,840 x – 20%x = P12,840 + P600 80%x = P13,440 x = P16,800 9. b- P6,080 Cost (P150 per unit x 40 units) Freight on shipment (P200 x 40/100) Cost of inventory on consignment 10. c - 6 Sales (unknown) Less Charges: Commission (unknown) Advertising Delivery and installation Cartage on consigned goods Remittance x – (20%x + P1,000 + P600 + P500) = P21,900 x – 20%x = P21,900 + P2,100 80%x = P24,000 x = P30,000
P6,000 80 P6,080 x 20%x P1,000 600 500 P21,900
__4,500 P1,500
Number of units sold = _P30,000_ =6 P5,000 per set 11. b – P2,300 Total Charges (10) Consignor’s charges: Cost Freight-out Consignee’s charges: Commission (20% x P30,000) Advertising Delivery and installation Cartage Total Sales price Profit on Consignment
Charges Related to Consignment Inventory on Sales Consignment (6) (3)
P30,000 2,500
P18,000 1,750
P9,000 750
6,000 1,000 600 __500__ P40,600
6,000 1,000 600 __350__ 27,700 _30,000_ __P2,300__
__150__ _P9,900_
12. d – None of the above (P9,900) – refer to No. 11 for computation. 13. No answer available - P17,625 Sales – (Sales x 20%) – P600 – P390 – P210 = P12,900 .8 Sales = P14,100 Sales = P17,625. 14. a (P270 x 50) + [(P600 ÷ 80) x 50] = P13,875. AA Sales - Nos. 15 to 17: 15. a Gross collection (P15,000 x 70% x 80%)
P 8,400 __168 P 8,232
Less: Cash discount taken by customer (P8,400 x 2%) Net collection Less Charges: Expenses Commission (P8,400 x 15%) Due to Consignor Less: Advances Amount remitted
P 800 _1,260
__2,060 P 6,172 _6,000 P 172
16. b Total Charges (100%) Consignor’s charges: Cost Freight Consignee’s charges: Expenses Commission (15% x P10,500) Cash discount (P10,500 x 80% x
Charges Related to Consignment Inventory on Sales Consignment (70%) (30%)
P10,000 120
P 7,000 84
800 1,575 168
800 1,575 168
P 3,000 36
2%) Total Sales price (70% x P15,000) Profit on Consignment
P12,663
P 9,627 _10,500_ P 873
_P9,900_
17. b – refer to No. 16 for computation RR Products Company – Nos. 16 to 18 16. c Collection made pertaining to: May sale Down payment (3 x P50) Monthly payment thereafter (3 x P10) June sale Down payment (1 x P50) Total Less: Commission (P230 x 20%) Amount remitted
P 150 30
P 180 ___50 P 230 ___46 P 184
17. d – P140 Total Charges (5) Consignor’s charges: Cost Freight Consignee’s charges: Commission Total Sales price (4 units x P250/unit) Profit on Consignment
Charges Related to Consignment Inventory on Sales Consignment (4) (1
P 775 50
P 620 40
P 155 10
200 P1,025
200 P 860 _ 1,000 P 140
____ P165
18. b – refer to No. 17 for computation 19. b Collection made: Cash sale (P1,500 x 2) Credit sale (P1,800 x 25%) Total Less: Charges Freight Commission [(P3,000 + P1,800) x 15%] Amount remitted
P 3,000 ___450 P3,450 P 320 __720
__1,040 P 2,410
20. a Total Charges (5) Consignor’s charges: Cost
P4,000
Charges Related to Consignment Inventory on Sales Consignment (3) (2) P 2,400
P 1,600
Freight Consignee’s charges: Freight Commission Total Sales price Profit on Consignment
200
120
320 720 P5,240
80
192 720 P 3,432 4,800 P 1,368
128 ______ P1,808
21. b – P1,808 – refer to No. 20 for computation 22. d – 244,600 Sales on credit (14,000 per unit x 12 units) + (13,000 x 10) Less: Sales allowance granted Bad debts Commission [2% x (P298,000 – P2,000)] Amount still due from BB, Inc
P298,000 P 2,000 7,000 _44,400
__53,400 P 244,600
23. d – P67,280 Total Charges (30) Consignor’s charges: Cost Freight-out Consignee’s charges: Sales allowance Bad debts Commission [15% x (P298,000 – P2,000)] Total Sales price [P14,000 per unit x 12 units) + (P13,000 per unit x 10 units)] Consignment profit
Charges Related to Consignment Inventory on Sales Consignment (22) (8)
P240,000 1,800
P176,000 1,320
2,000 7,000
2,000 7,000
44,400 P295,200
44,400 P230,720
P64,000 480
_P64,480_
298,000 P 67,280
24. d – refer to No. 23 for computation 25. b – 395 Sales (unknown) Less Charges: Commission (unknown)
x
(
__x__ P10 P100 __P45__
Delivery expense Remittance x-
[( _x__ ) P10 + P45 ] 100
x – _P10x_ = P35,550 P100
= P35,505
) ________ P35,505
P100x – P10x = P3,555,000 P90x = P3,555,000 x = P39,500 Number of ballpens sold = _P39,500_ = P395 P100 per unit 26. b Sales Cost of sales Gross profit Operating expenses: Commission (P30,000 x 5%) Freight-in (P260 x P19,500*/P26,000) Others Regular (P15,150 x P19,500/P26,000) Consignment (P15,150 x P30,000/P150,000) Total Net profit
Regular Sales P120,000 84,000 P 36,000
*P26,000 – P6,500 = P19,500
27. d – P5,775 (refer to No. 26 for computation) 28. a – (P18,000 + P900) = P18,900 Theories 1 d . 2 d . 3 a . 4 c .
Consignmen t Sales P30,000 19,500* P10,500
Total P150,000 103,500 P 46,500
P 1,500 1,950
P 1,500 1,950
3,030 P 4,725 P 5,775
3,030 _P16,845_ P29,655
12,120 _______ P 12,120 P 23,880
