Consignment Sales.doc

QUIZ-CONSIGNMENT

PROF ZENAIDA VERACRUZ- MANUEL

A. THEORY. Letter choices on the date column of your worksheet. 1. The consignment in account was credited for P12,000 and the consignment out was credited for the same amount . This represents revenue earned from consignment. From whose viewpoint is the second statement correct? a) From both consignee and consignor c) From consignor only b) From consignee only. d) some deductions from both should be made first 2. If all consigned goods were sold, a debit balance in the consignment out account represents a) consignment loss c) inventoriable cost b) deferred costs d) advances received 3. If consignor allowed consignee to sell on account, in consignor’s book this is recorded as a) due from consignee c) inventoriable cost b) deferred cost d) due to consignor 4. Consignor paid freight on goods consigned. If goods are unsold, freight should be part of a) expenses c) inventoriable cost e) both b) and c) b) balance of consignment out d) balance of consignment in f) b), c and d) are correct 5. Principle of matching is applied to which of the following costs? a) Installation c) commission e) none of the aforementioned costs b) delivery d) all 6. Goods on consignment including freight and insurance are inventoriable cost of a) consignor until it is sold c) both consignee and consignor b) consignee until it is sold d) neither consignee nor consignor 7. Consignor recognizes revenue when consigned goods are a) shipped to consignee c) sold by consignor to consignee b) received by consignee d) included in the account sales 8. The title Merchandise Shipment on Consignment is closed in consignor’s book at the end of the accounting period to determine a) total cost of goods sold c) total cost of goods shipped b) regular cost of goods sold d) total cost of goods returned 9. If consignee did not make a full remittance, which account will have a debit balance? a) Consignment In c) Due From Consignee b) Consignment Out d) Both a) and c) 10. Consigned goods while in the hands of the consignee should be a) deducted from consignor’s available for sale c) added to consignor’s inventory b) added to consignee’s inventory d) recorded as Due from Consigne PROBLEMS (Problems A and D on the left side of the worksheet. Problems B and C on the right side. A. (RPCPA EXAM) Aircon Inc. consigned 12 one-horse power air-condition units to Argy Trading and paid P2,000 freight out. Gross margin is 25% of selling price which was set for P12,000. The consignee is allowed a commission of 5% on sales but is required to give an advance payment to be deducted proportionately based on sales made. Argy Trading’

151

account sales on December 2015, gave a remittance for 6 units sold after deducting selling expenses of P800, delivery and installation of P1,200 and the appropriate commission and advances. Required: 1. Prepare an account sales. 2. Entries in the books of the consignor. Consignment profit is determined separately. 3. Reclassifying entry(s) of consignor, if any. B. Henry Inc. sells piano for Key Inc. on consignment basis. His ledger postings show among others the following account: Consignment In - Key Inc. Freight and Insurance Sales (3) (10 pianos) P3, 500 Returns (3) Delivery 300 Commission 6,300 Freight for 3 pianos returned 1,050

P21,000

Just before the year ended in 2015, Henry made only an 80% remittance of the total amount due. Sales price is 100% above cost. Key paid P2,750 shipping cost for the shipment. Required: 1) Entries in the book of the consignee to record only a) remittance and b) reclassification for reporting purposes. 2) All entries in the books of the consignor. Support with a table analyzing for cost of total shipment, goods sold, goods returned, goods sold. 3) Give the proper presentation of the balances in the balance sheet of a) consignee and b) consignor. C. REFER TO PROBLEM B. Two more units were sold on January2016. Related expenses needed were incurred by Henry and full remittance was made. Question 1: How much will be remitted? Question 2: How much is Key’s consignment profit or loss? Question 3: How much is inventoriable cost of Key? D. Moran Appliances consigned on November 5 five electric fans costing P800 each to Dizon Marketing Company, which was to sell them at any price above P1,000. The amount over P1,000 will represent consignee's commission. Moran paid the trucking cost of P200 and is to reimburse Dizon for local delivery to customers. During December, Dizon Marketing sold three fans, two for cash at P1,500 each and one on credit at P1,800 of which it had collected 50%. Dizon paid P170 for local delivery to customers. Full remittance is required within a month from the time goods are sold. Question 1: Assuming that Dizon Marketing made interim settlement as of December 15, how much should it remit to Moran Appliances? Question 2: How much is the profit to date of Moran Appliances resulting from the consignment? Question 3: How much is the profit to date of Dizon?

152

QUIZ-CONSIGNMENT

PROF ZENAIDA VERACRUZ- MANUEL

SOLUTION 1.C

2. A

3A

4A

5E

6D

7.D

8.B

9C

11. C

Prob A PROBLEMS 1. Sales (6 x 12,000) Less: Selling Installation Commission Balance Less: Advances Due for remittance Units on Hand 2,

Entries (Consignor) a. Consignment Out – Argy Merchandise Shipment on consignment

5,600 66,400 6,000 60,400 6

108,000

Consignment Out – T. Nippon Cash

2,000

Cash Advances from Consignee

3.

72,000

800 1,200 3,600

12,000

Cash Advances Consignment Out Consignment Out – T. Nippon

60,400 6,000 5,600

Consignment Out Consignment Profit

11,400

Reclassifying entry: Merchanise Inventory-Consignment Deferred Consignment Expenses Consignment Out (unsold including freight) This should close the consignment out account. Sales Cost of Sales (72,000 x 75%) Commission Selling Expenses Delivery & Installation Freight (2,000 x 6/12) Net Profit

Prob B 1. Balance of the consignment in represents amount for remittance Remittance 80% of P9850= P7,880 Due to consignor 20%= P1,970 1) Consignment In -Key Inc.

54,000 1,000

P54,000 3,600 800 1,200 1,000

108,000 2,000 12,000

72,000 11,400

55,000 P72,000

60,600 P 11,400

P9,850

7,880

153

Cash

7,880

2) Consignment In Due to Consignor

1,970

b) Entries in the Books of Consignor Consignment Out – Henry Inc. Merchandise Shipment on Consignment (21,000/3 = 7,000 /200% = 3,500 x 10)

35,000

Consignment Out – Henry Inc. Cash

7,880 11,150 1,970

Merchandise Shipment on Consignment Consignment Out

10,500

Consignment Loss Consignment Out

Cost Shipping Cost Freight Delivery Commission Freight

2,750

21,000 10,500

900

Total 35,000 2,750 3,500 300 6,300 1,050 48,900

Sales Less charges for goods sold Expenses for goods returned Consignment Loss

4 Unsold 14,000 1,100 1,400

3 Returns 10,500 825 1,050

16,500

1,050 13,425

P18,975 2,925

900 3 Sold 10,500 825 1,050 300 6,300 18,975

P21,000 21,900 P 900

Reclassifying entry: Reclassifying entry: Merchanise Inventory-Consignment Deferred Consignment Expenses Consignment Out (unsold including freight)

14,000 2,500

3) Consignee’s Balance Sheet Current Liability-Due to Consignor

C. 1) Sales (2x 7,000) Less: Delivery Expenses to be reimbursed Commission

16,500

P 1,970

Consignor’s Balance Sheet Current Assets: Due from Consignee Merchandise Inventory-Consignment Deferred Consignment Expenses

154

35,000

2,750

Cash Consignment Out – Henry Inc. Due from Consignee Consignment Out – Henry Inc.

Table

1,970

14,000 (200) (4,200)

P 1,970 14,000 2,500

Balance to be remitted from addtl sales Due to Consignor previous swales Total 2) Sales Less:

COS (2 x 3,500) Shipping Cost Commission Freight Delivery Expense Profit of Moran Appliance

3) Inventory- Consignment Deferred Consignment Expenses Consignment Out debit balance D.

a)

For remittance (3 x 1,000) Less: Delivery Expenses Balance to be remitted

b) Sales Less:

c)

9,600 1,970 P11,570

7,000 550 4,200 700 200

14,000

12,650 P 1,350

P7,000 1,250 P8,250 3,000 170 2,830

COS (3 x 800) Trucking Cost (3/5 x 200) Delivery Expense Profit of Moran Appliance

2,400 120 170

Sales (1,500 x 2 = 3,000 + 1,800) Less: Contract Price (3 x 1,000) Profit of Dizon representing commission

4,800 3,000 1,800

3,000 2,690 P 310

Exercise 4 4.

a.

*

Sales (80 x 25,000) Less: Commission Advertising Del. & Inst. Cartage Freight Balance Less check endorsed Balance still due Returns Balance still due Remittance Total Less charges except commission Net after 15% commission Divide by Total Sales

* 2,050,000 307,500 3,500 750 1,500 1,250

93,000 1,642,500 1,735,500 7,000 1,742,500 85% P2,050,000

314,500 1,735,500 1,642,500 P 93,000 5 sets

/25,000 = 82, units sold

155

b. Commission Advertising Del. & Inst. Cartage Freight Remittance Merchandise shipped Freight Commission Advertising Del. & Inst. Cartage Freight Profit c)

Consignment in – White Power House 307,500 Consignment Sales 3,500 750 1,500 1,250 1,642,500

Consignment Out – Eternal Power Block 1,800,000 2,050,000 Consignment Sales 1,500 60,000 Ret. Merchandise 300,000 3,500 750 500 250 748,940

Analysis of Cost and Expenses Charges of Consignor Cost of Merchandise Freight Charges of Consignee Freight On Return Del. & Inst. Cartage Commission Advertising Total

(150) Total

60,000.00 183.33

1,250 750 1,500 307,500 3,500 2,120,000

1,250.00

Charges rel.ated to sets sold Expenses related to return Consignment Profit

(63) Sets Unsold

(82) Sets Sold

756,000 2,310

50.00

630.00

________ 61,483.33

_________ 758,940.00 1,299,576.67 1,483.33

984,000 3,006.67 750.00 820.00 307,500 3,500.00 1,299,576.67 2,050,000.00 1,301,060.00 748,940.00

Entries on books of consignee Received 150 generators from White Power House to be sold at P25,000 each for 15% commission, expenses reimbursable. Consignment In –White Power House Cash Consignment Receivable Cash Consignment In –White Power House Cash Consignment Receivable Returned 5 Generators to White Power House Consignment In – White Power House Cash

156

(5) Sets Ret.

1,800,000 5,500

d) Sales Less:

c)

2,050,000

5,750 1,025,000 1,025,000 932,000

1,250

5,750

2,050,000 932,000

1,250

Consignment In – White Power House Cash Books of Consignor Consignment Out – Eternal Power Block Merchandise shipment on consignment Consignment Out – Eternal Power Block Cash Cash Due from Consignee Consignment Out – Eternal Consignment Out – Eternal Merchandise Shipment on Consignment Consignment Out – Eternal Consignment Out Consignment Profit or Loss

1,642,500

1,800,000 5,500

1,642,500 93,000 314,500 60,000 748,940

1,642,500

1,800,000 5,500

2,050,000 60,000 748,940

157