Advac 14 Solution Chapter 10

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 Entries on Consignor’s Books(Herbalife Supplier) Entries on Consignee’s Books(Conrado Enterprises) Shipment of goods on consignment. Inventory on Consigment…… Finished Goods Inventory*.... 60,00 0 60,00 0 No entry (memorandum entry only) 2. Payment of expenses by

consignor. Inventory on Consignment…..

Cash…….. 600 600

No entry

3. Payment of expenses

by consignee. Inventory on Consignment…… Consignee Payable……… 2,400 2,400 Consignor Receivable Cash………. 2,400 2,400 Advances by

Consignor Cash……… Advances from Consignee….. 3,360 3,360 Advances to Consignor Cash 3,360 3,360 Sale of merchandise No entry. Cash Consignor

payable 48,00 0 48,00 0 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.. 4,800 3,360 37,44 0 2,400 48,00 0 Consignor Payable.. Commission Revenue…….. Consignor Receivable ….. Cash……… Advances from Consignee…… 48,00 0 4,800 2,400 37,44 0 3,360 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 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:

Jingka Juice

Sales (60 sachets of herbal goods) P48,000

Charges: Finishing costs……….. P 2,400 Commission (P48,000 x 10%)……….. 4,800 7200 Due to Consignor………. P40,800 Less: Advances………. 3,360 Balance……… P37,440 Remittance Enclosed……… 37,440 Balance Due……… P 0

Items on Hand (50 sachets of herbal goods): P60,000 x

50% P30,000

Problem II

1. The account sales:

Sold for the Account of: AA Company Sales (8 sets @ P24,000)……… P 192,000 Charges: Freight-in……… P 6,000 Advertising expense………… 2,400

Deliveries and installation expenses 9,600

Repairs expense – on units sold.. 4,800

Commissions, 25% of sales 48,000 70,800 Due to Consignor………. P121,200 Less: Advances………. 0 Balance……… P121,200 Remittance Enclosed……… 30,000 Balance Due……… P 91,200

Items on Hand………… 15 sets

Items Returned (defective)….……. 2 sets

2. The inventory on consignment amounted to P189,000 computed as:

Charge Analysis Sales (8 sets) Inventor y (15 sets) Total (25 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 set)

3,600* 5,400 9,000

Charges by consignee:

Freight-in (P6,000/25 sets =P240 per set)

2,400* 3,600 6,000

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

* 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) P 192,000

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* 99,600 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 67,200

Net Income P 25,200

Problem III

Summit Electronics Company

Inventory on Consignment (800 @ P570) 456,000

Finished Goods Inventory 456,000

Consignment Expense (P368,000 x 30%) 110,400

Accounts Receivable--Consignee Sales 257,600

Sales Revenue—Consignment (P920 x 400) 368,000

Cost of Consigned Goods Sold (P570 x 400) 228,000

Inventory on Consignment 228,000

Cash [(P920 x 70%) x 380] 244,720

Accounts Receivable--Consignee Sales 244,720

Farley Hardware

No entry upon receipt of consigned merchandise.

Cash (P920 x 400) 368,000

Consignor Payable 257,600

Commission Revenue 110,400

Consignor Payable 244,720

Cash 244,720

Inventory shipped on consignment to Ashe Company P18,000

Freight paid by Seahawks 900

Inventory received on consignment from Fenn Company 12,000

Freight paid by Fenn 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__ = 8 tapes Price per tape P200 per tape

Sales ……….. P1,600 Less Commission of consignee………... 400 Amount remitted by Beta View Store………...P1,200 2. a – P 370 Charges Related to Total Charges (25) Consignment Sales (8) Inventory on Consignment (15) Consignor’s charges: Cost P2,500 P800 P1,500 Freight-out 75 30 45

Consignee’s charge - Commission __400__ __400__ _______

Total P2,975 1,230 _P1,545_

Sales price _1,600_

Consignment profit _P370_

3. a – P1,545 (refer to No. 2 for computation) 4. b

Sales (P2,250 / 15%) P15,000

Divided by: Selling price per unit P 1,000

Number of units sold 15 units

5. c Sales P15,000 Less Charges: Commission P 2,250 Advertising 1,500 Delivery expense ___750 __4,500 Due to Consignor P10,500 Less: Advances

Value of note – sight draft: (100 beds x P600 per bed) x

60% P36,000

Multiplied by: Proportional number of beds sold 15/100 __5,400

6. d – P1,500

Sales P15,000

Less Charges:

Consignor’s charge:

Cost of beds (P600 per bed x 15 beds) 9,000

Consignee’s charges:

Commission P2,250

Advertising 1,500

Delivery expense ___750 __4,500

Consignment net income P1,500

7. a – no items were sold in November;

Sales (unknown) P x Less Charges: Commission 15% x Remittance P 27,200 x – 15%x = P27,200 85%x = P27,200 x = P32,000 8. c – P16,800 Sales (unknown) x Less Charges: Advertising P500

Delivery and installation charges 100 Commission (unknown) 20%x _______ Remittance 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) P6,000

Freight on shipment (P200 x 40/100) 80

Cost of inventory on consignment P6,080

10. c - 6

Sales (unknown) x

Less Charges:

Commission (unknown) 20%x

Advertising P1,000

Delivery and installation 600

Cartage on consigned goods 500

Remittance P21,900

x – (20%x + P1,000 + P600 + P500) = P21,900 x – 20%x = P21,900 + P2,100

80%x = P24,000 x = P30,000

Number of units sold = _P30,000_ = 6 P5,000 per set 11. b – P2,300 Charges Related to Total Charges (10) Consignment Sales (6) Inventory on Consignment (3) Consignor’s charges: Cost P30,000 P18,000 P9,000 Freight-out 2,500 1,750 750 Consignee’s charges: Commission (20% x P30,000) 6,000 6,000 Advertising 1,000 1,000

Delivery and installation 600 600

Cartage __500__ __350__ __150__

Total P40,600 27,700 _P9,900_

Sales price _30,000_

Profit on Consignment __P2,300__

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

Less: Cash discount taken by customer (P8,400 x 2%) __168

Net collection P 8,232 Less Charges: Expenses P 800 Commission (P8,400 x 15%) _1,260 __2,060 Due to Consignor P 6,172 Less: Advances _6,000 Amount remitted P 172 16. b Charges Related to Total Charges (100%) Consignment Sales (70%) Inventory on Consignment (30%) Consignor’s charges: Cost P10,000 P 7,000 P 3,000 Freight 120 84 36 Consignee’s charges: Expenses 800 800 Commission (15% x P10,500) 1,575 1,575 Cash discount (P10,500 x 80% x 168 168

2%)

Total P12,663 P 9,627 _P9,900_

Sales price (70% x P15,000) _10,500_

Profit on Consignment P 873

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) P 150

Monthly payment thereafter (3 x P10) 30 P 180

June sale Down payment (1 x P50) ___50 Total P 230 Less: Commission (P230 x 20%) ___46 Amount remitted P 184 17. d – P140 Charges Related to Total Charges (5) Consignment Sales (4) Inventory on Consignment (1 Consignor’s charges: Cost P 775 P 620 P 155 Freight 50 40 10 Consignee’s charges: Commission 200 200 ____ Total P1,025 P 860 P165

Sales price (4 units x P250/unit) _ 1,000

Profit on Consignment P 140

18. b – refer to No. 17 for computation

19. b Collection made: Cash sale (P1,500 x 2) P 3,000 Credit sale (P1,800 x 25%) ___450 Total P3,450 Less: Charges Freight P 320 Commission [(P3,000 + P1,800) x 15%] __720 __1,040 Amount remitted P 2,410 20. a Charges Related to Total Charges (5) Consignment Sales (3) Inventory on Consignment (2) Consignor’s charges: Cost P4,000 P 2,400 P 1,600

Freight 200 120 80 Consignee’s charges: Freight 320 192 128 Commission 720 720 ______ Total P5,240 P 3,432 P1,808 Sales price 4,800 Profit on Consignment P 1,368

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) P298,000

Less: Sales allowance granted P 2,000

Bad debts 7,000

Commission [2% x (P298,000 – P2,000)] _44,400 __53,400

Amount still due from BB, Inc P

244,600 23. d – P67,280 Charges Related to Total Charges (30) Consignment Sales (22) Inventory on Consignment (8) Consignor’s charges: Cost P240,000 P176,000 P64,000 Freight-out 1,800 1,320 480 Consignee’s charges: Sales allowance 2,000 2,000 Bad debts 7,000 7,000 Commission [15% x (P298,000 – P2,000)] 44,400 44,400 Total P295,200 P230,720 _P64,480_

Sales price [P14,000 per unit x 12 units)

+ (P13,000 per unit x 10 units)] 298,000

Consignment profit P 67,280

24. d – refer to No. 23 for computation 25. b – 395 Sales (unknown) x Less Charges: Commission (unknown) __x__

(

)

[( _

)

]

P100x – P10x = P3,555,000 P90x = P3,555,000 x = P39,500

Number of ballpens sold = _P39,500_ = P395 P100 per unit 26. b

Regular Sales Consignment Sales Total

Sales P120,000 P30,000 P150,000 Cost of sales 84,000 19,500* 103,500 Gross profit P 36,000 P10,500 P 46,500 Operating expenses: Commission (P30,000 x 5%) P 1,500 P 1,500 Freight-in (P260 x P19,500*/P26,000) 1,950 1,950 Others Regular (P15,150 x P19,500/P26,000) 12,120 Consignment (P15,150 x P30,000/P150,000) _______ 3,030 3,030 Total P 12,120 P 4,725 _P16,845_ Net profit P 23,880 P 5,775 P29,655 *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