EXERCISES Exercise 5 – 1
1. Inventory on Consignment 90,000
Merchandise Inventory 90,000
To record transfer of merchandise to consignee.
2. Consignee Receivable (P24,000 x 130%) 31,200
Consignment Sales Revenue 31,200
To record consignment sales.
3. Cost of Consignment Goods Sold 24,000
Inventory on Consignment 24,000
To record cost of goods sold.
4. Merchandise Inventory 66,000
Inventory on Consignment 66,000
To record return of consigned goods.
5. Commission Expense (P31,200 x 10%) 3,120 Cash 28,080 Consignee Receivable 31,200 or 2. Commission Expense 3,120 Cash 28,080
Consignment Sales Revenue 31,200
3. Cost of Consignment Goods Sold 24,000
Inventory on Consignment 24,000
To record cost of goods sold.
4. Merchandise Inventory 66,000
Inventory on Consignment 66,000
To record return of consigned goods.
Exercise 5 – 2
1. Consignor Books:
Inventory on Consignment 500,000
Finished Goods Inventory 500,000
Inventory on Consignment 40,000
Cash 30,000
Commission Expense (P420,000 x 10%) 42,000
Consignee Receivable 378,000
Consignment Sales 420,000
Cost of Consignment Goods Sold 362,880
Inventory on Consignment 362,880
*Cost of goods sold – P420,000 /1.25 = P336,000 Freight costs – P40,000 / P500,000 = 8%
Freight on goods sold – P336,000 x 8% = P26,880
Total costs of goods sold – P336,000 + P26,880 = P362,800
Cash 278,000
Consignee Payable 10,000
Consignee Receivable 288,000
2. Consignee Books:
Memorandum entry to record receipt of goods on consignment.
Consignor Receivable 10,000 Cash 10,000 Cash 420,000 Consignor Payable 420,000 Consignor Payable 42,000 Commission Revenue 42,000 Consignor Payable 288,000 Cash 278,000 Consignor Receivable 10,000
3. Consignor financial statements:
Statement of Financial Position – Assets section
Consignee receivable P 90,000
Inventory on consignment 177,120
Statement of Recognized Income and Expenses
Consignment sales P420,000
Less Cost of consignment sales 362,880 P57,120
Commission expense 42,000
Profit from consignment P15,120
Exercise 5-3
Requirement 1 – Consignment profits calculated separately Books of Consignor
1. Consignment –Out 7,000
2. Cash 3,500 Consignment-Out 2,500 Consignment-Out 6,000 3. Consignment-Out 1,300 Consignment Income 1,300 Sales (4 sets @P1,500) P6,000 CGS (4 sets @P700) ( 2,800) Freight-in (4/10 x P1,000) ( 400) Commission (25% x P6,000) ( 1,500) Consignment income P1,300 Books of Consignee
1. Received 10 sets of electric fan from Ledesma …………
2. Consignment-In 1,000 Cash 1,000 3. Cash 6,000 Consignment-In 6,000 4. Consignment-In 1,500 Consignment Income 1,500 5. Consignment-In 3,500 Cash 3,500
Requirement 2 – Consignment profits not calculated separately Books of Consignor
1. Shipped merchandise to Amoranto, a consignee, ………
2. Cash 3,500 Freight 400 Commission Expense 1,500 Merchandise on Consignment 600 Sales 6,000 3. Merchandise on Consignment 4,200 Income Summary 4,200
Unsold merchandise on consignment (6 sets @P700) Books of Consignee
1. Received 10 sets of electric fan from Ledesma, a consignor.. ………..
2. Ledesma 1,000
Cash 1,000
3. Cash 6,000
4. Purchases (P6,000 – P1,500 commission) 4,500
Ledesma 4,500
5. Ledesma 3,500
Cash 3,500
Exercise 5 – 4
1. Sales of laser discs, net of commissions and cartage P181,800
Less: Cost P180,000
Freight and handling 5,400 185,400
Loss on laser discs consignment P 3,600
2. Sales of TV sets, net of commissions and delivery & installation costs P173,250
Less: Cost (15 x P9,000) P135,000
Freight and handling [(15 + 3*)/24** x P10,800] 8,100
Freight on return of defective units 1,080 144,180
Profit on TV sets on consignments P 29,070
* Number of units returned = Cost of returned units / Cost per unit = P27,000 / P9,000
= 3
** Units shipped to consignee = Total cost of TV sets shipped / Cost per unit = P216,000 / P9,000 = 24 3. TV sets P54,000 + (P10,800 6/24 = P2,700) = P56,700 Exercise 5 – 5 1. Sales (300 x P1,000) + (100** x P1,100) P410,000* Cost of sales (400 x P600) 240,000 Gross profit P170,000 Expenses: Freight (400/500 x P5,500) P 4,400 Safety devices (100/200 x P10,000) 5,000 Commission (P410,000 x 10%) 41,000 Delivery cost 4,500 54,900 Consignment profit P115,100
*Consignee remitt6ance and charges represent only 90% of sales in as much as the 10% commission of the consignee has not yet been included among the charges (P364,500 + P4,500 = P369,000 / 90% = P410,000)
** The 100 units with safety device sold at P1,100 is computed as follows:
Sales P410,000
Sales of units without safety device (300 x P600) 300,000
Sales of units with safety device P110,000
2. Cost (100 x P600) P60,000
Freight (100/500 x P5,500) 1,100
Safety device (100/200 x P10,000) 5,000
Inventory cost of consigned goods P66,100
PROBLEMS Problem 5-1
Req. 1. Books of consignee; consignment sales merged with regular sales
April Received 20 sets of VCD player………
CCM Corp. 1,750 Cash 1,750 Accounts Receivable 24,000 Sales 24,000 Purchases 20,000 CCM Corp. 20,000 Cash 10,000 Accounts Receivable 10,000 CCM Corp. 5,000 Cash 5,000
May Accounts Receivable 18,000
Sales 18,000 Purchases 15,000 CCM Corp. 15,000 Cash 15,000 Accounts Receivable 15,000 CCM Corp. 10,000 Cash 10,000
Req. 2 – Books of consignor; consignment profits calculated separately
April Consignment-Out 36,000 Merchandise Inventory 36,000 Cash 5,000 Consignment – Out 1,750 Receivable – Consignee 13,250 Consignment – Out 20,000 Consignment – Out 4,900 Consignment Income 4,900
Sales (8 sets @P2,500) P 20,000 CGS (8 sets @P1,800) ( 14,400) Freight-in (P1,000 x 8/20) ( 400) Cartage-in (P750 x 8/20) ( 300) Consignment profit P 4,900 May Cash 10,000 Receivable – Consignee 5,000 Consignment – Out 15,000 Consignment – Out 3,675 Consignment Income 3,675 Sales (6 sets @P2,500) P15,000 CGS (6 sets @P1,800) ( 10,800) Freight-in (P1,000 x 6/20) ( 300) Cartage-in (P750 x 6/20) ( 225) Consignment profit P 3,675
3. Charge and Profit analysis
April May
Total Sales Inventory Sales Inventory
Charges by consignor:
Cost of consigned goods P36,000 P14,400 P21,600 P10,800 P10,800
Charges by consignee Freight-in 1,000 400 600 300 300 Cartage-in 750 300 450 225 225 Total P37,750 P15,100 P22,650 P11,325 P11,325 Sales price 20,000 15,000 Consignment profit P 4,900 P 3,675 Problem 5-2 Books of consignor 1. Consignment – Out 50,000
Merchandise Shipment on Consignment 50,000
2. Consignment – Out 750 Cash 750 3. Cash 5,000 Consignment – Out 10,600 Receivable – Consignees 16,400 Consignment – Out 32,000
4. Merchandise Shipment on Consignment 4,000
Consignment – Out 4,000
5. Consignment – Out 5,700
Consignment Income 5,700
Total Sales Inventory
Charges by consignor:
Cost of consigned goods P46,000 P16,000 P30,000
Freight-out 750 300 450
Charges by consignee
Cartage-in 1,000 400 600
Delivery and installation 1,600 1,600
Commission 8,000 8,000
Total P57,350 P26,300 P31,050
Sales price 32,000
Consignment profit P 5,700
*Note: Freight and cartage on sets returned are charged against sales of the period. Books of consignee
1. Received 50 cordless phones………….
2. Accounts Receivable 32,000
Consignment – In 32,000
3. Cash 15,600
Accounts Receivable 15,600
P32,000 – P16,400 (collectible) = P15,600
4. Returned four (4) defective cordless phones……….
5. Consignment – In 15,600
Delivery and Installation Expense 1,600
Commission on Consignment 8,000
Cash 5,000
Remittance
Problem 5-3
Correcting entry to bring accounts with Alejo up to date
Consignment Commissions 58,500
Freight on Consignment Shipments (P2,600 x 65/100) 1,690
Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100) 910
Consignment Sales 6,000
Alejo 67,100
Account sales – Alejo
Sales (65 stoves @ P3,600) P234,000
Commission (25% of P234,000) ( 58,500)
Freight ( 2,600)
Amount owed P172,900
Balance-charge against Sunstar P 15,000
Entry that should have been made for transactions of Alejo on the books of consignor:
Cash 187,900
Consignment Commission 58,500
Freight on Consignment Shipments 1,690
Prepaid Expenses on Consigned Merchandise 910
Consignment Sales 234,000
Alejo 15,000
Net effect of entries already made with Alejo for transfer of merchandise and remittance
Cash 187,900
Alejo 52,100
Consignment Sales 240,000
Correcting entry to bring accounts with Burgos up to date
Consignment Commissions 13,500
Freight on Consignment Shipments (P2,600 x 65/100) 750
Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100) 1,250
Consignment Sales 42,000
Burgos 57,500
Account sales – Burgos
Sales (15 stoves @ P3,600) P54,000
Commission (25% of P54,000) ( 13,500)
Freight ( 2,000)
Amount owed P38,500
Total amount remitted ( 11,500)
Balance-amount owed Sunstar P27,000
Entry that should have been made for transactions of Burgos on the books of consignor:
Cash 11,500
Consignment Commission 13,500
Freight on Consignment Shipments 750
Prepaid Expenses on Consigned Merchandise 1,250
Burgos 27,000
Consignment Sales 54,000
Net effect of entries already made with Burgos for transfer of merchandise and remittance
Cash 11,500
Burgos 84,500
Consignment Sales 96,000
Problem 5-4
1. Cash 5,100
Operating Expenses 900
Receivables-Consignees 6,000
Remittance for 10 sets less charges
2. Sales 3,000
Receivables – Consignees 3,000
Unsold units previously recognized as sales.
3. Merchandise in Transit 1,600
Cost of Goods Sold 1,600
Merchandise returned and still in transit. Entries to bring account with Estrella up to date
1. Cash 13,400 Merchandise on Consignment 600 Operating Expenses 1,000 Receivables – Consignees 15,000 2. Sales 9,000 Receivables – Consignees 9,000 3. Merchandise on Consignment 4,800
Cost of Goods Sold 4,800
Unsold units in the hands of consignee
4. Merchandise on Consignment 1,700
Operating Expenses 1,700
Expenditures related to unsold consigned goods charged to expense
Entries to bring account with Fajardo up to date
1. Operating Expenses 960 Receivables – Consignees 600 Accounts Payable 360 2. Sales 2,400 Receivables – Consignees 2,400 3. Merchandise in Transit 1,280 Receivables – Consignees 1,280 Closing Entries 1. Sales 715,600
Cost of Goods Sold 420,100
Operating Expenses 89,160
Income Summary 206,340
Income Tax Payable 72,219 3. Income Summary 72,219 Income Tax 72,219 4. Income Summary 134,121 Retained Earnings 134,121 2. Moonstar Company Statement of Financial Position
December 31, 2008 Current assets: P134,000 Cash 62,720 Receivables – Consignees Inventories: On hand P112,000 In transit 2,880 On consignment 7,100 121,980
Total Current Assets 318,700
Plant and Equipment 170,000
Total Assets P488,700
Current Liabilities:
Accounts Payable P25,360
Income Tax Payable 72,219
Ordinary Share Capital, P100 par P200,000
Retained Earnings
Balance, beginning P 57,000
Net income for 2008 134,121 191,121
Total Shareholders’ Equity 391,121
Total Liabilities and Shareholders’ Equity P488,700
MULTIPLE CHOICE 1. A 2 C 3. A 4. A P180,000 + P9,000 = P189,000 5. A Receipts (215 x P500) P107,500
Less Shipping charges 2,100
Remittance P105,400
6. B (215 x 40% x P580) + (215 x 60% x P640) – (215 x P500) = P24,860
7. D Receipts ( 7 dozens x 12 x P2,000) P168,000
Charges: Expenses P 3,000
Remittance P139,800 8. C Sales 7 x 12 x P2,000 P168,000 Cost of Sales 7 x 12 x P1,000 P84,000 Freight 7 x P30 210 Expenses 3,000 Commission P168,000 x 15% 25,200 112,410 P 55,590 9. C 10. B Sales ( 4 x P7,000) P28,000 Charges: Commission (20% x P28,000) P5,600 Freight 1,600 7,200 Remittance P20,800 11 D Cost (6 x P4,000) P24,000 Freight (P1,600 x 6/10) 960
Balance of Merchandise on Consignment account P24,960
12 D Sales P28,000
Cost (4 x P4,000) 16,000
Gross profit P12,000
Less: Commission P5,600
Freight (P1,600 x 4/10) 640 6,240
Net profit on consignment P 5,760
13. B Remittance P64,980 Charges: Delivery expense P 850 Repairs 2,000 2,850 Total P67,380 ÷ 85% Sales P79,800 Cost of sales 52,000* Gross profit P27,800 Expenses: Commission (P79,800 x 15%) P11,970 Repairs (P2,000 x 60/100) 1,200 Delivery 850 Shipping cost (P900 x 260/300) 780 14,800 Consignment profit P13,000 *Sales P79,800
Less Sales of units with defects (200 x P300) 60,000
Sales of repaired units P19,800
Selling price of repaired units ÷ P330
Number of repaired units that were sold 60
Units sold without repairs 240
Total number of units sold 300
Unit cost x P200
14 B Cost (40 x P200) P 8,000
Repairs (P2,000 x 40/100) 800
Shipping cost (P900 x 40/300) 120
Value of inventory on consignment P 8,920
15. D Remittance P54,600
Charges:
Cartage P 600
Advertising 3,600
Delivery and installation 2,400 6,600
Total P61,200
÷ 85%
Sales P72,000
16 C Sales P72,000
Cost and expenses:
Cost (6 x P7,200) P43,200
Freight (P4,800 x 6/10) 2,880
Cartage (P600 x 6/10) 360
Advertising 3,600
Delivery and installation 2,400
Commission (15% x P72,000) 10,800 63,240
Consignment income P 8,760
17. D Remittance P68,250
Consignee charges, excluding the 15% commission
(P4,500 + P3,000 + P750) 8,250
Sum of remittances and charges P76,500
÷ 85%
Sales price of 6 refrigerators P90,000
18 A Sales P90,000 Cost of sales (6 x P9000) 54,000 Gross profit P36,000 Expenses: Commission (P90,000 x 15%) P13,500 Freight-out (P6,000 x 6/10) 3,600 Marketing expense 4,500
Delivery and installation 3,000
Cartage (P750 x 6/10) 450 25,050
Net profit from the sale of consigned goods P10,950
19 D P90,000 x 15% = P13,500
20 A Sales collected [(2 x P1,500) + (1 x P1,800 x 25%)] P3,450
Commission (P3,450 x 15%) 720
21 C Sales P4,800 Cost of sales ( 3 x P800) 2,400 Gross profit P2,400 Expenses: Trucking (P200 x 3/5) P120 Delivery 170 Commission 720 _____
Profit resulting from consignment P1,390
22 B Sales P21,000 Cost (7 x P2,000) 14,000 Gross profit P 7,000 Expenses: Advertising P1,000 Commission 4,200 Freight (P600 x 7/10) 420 5,620
Net income on the consignment P 1,380
23 C ( 3 x P2,000) + (P600 x 3/10) = P6,180
24 D Remittance P3,750
Charges by consignor
Cost (P3,840 x 30/48) P2,400
Freight and handling (P1,000 x 30/48) 625
Freight and handling charged by consignee 75 3,100
Net income P 650
25 C T-shirts:
Cost (P3,840 x 18/48) P1,440
Freight and handling (P1,000 x 18/48) 375 P1,815
Baby dresses:
Cost (P2,400 x 4/24) P 400
Freight and handling (P540 x 4/24) 90 490
Cost of the inventory in the hands of consignee P2,305
26. Sales P84,000 Cost of sales (P90,000 x 7/10) 63,000 Gross profit P21,000 Expenses: Freight (P3,000 x 7/10) P2,100 Commission 8,400 Cartage-in (P1,050 x 7/10) 735 11,235
Profit on consignment of TV sets P 9,765
27. C TV sets (P94,050 x 3/10) P28,215
DVD sets (P84,450 x 2/5) 33,780
28. A P3,375 / 15% = P22,500 / P1,500 15 units 29 C Sales (15 x P1,500) P22,500 Less: Advertising P2,250 Delivery expense 1,125 Commission 3,375 Advances (150 x P900 x 60% x 15/150) 8,100 14,850 Remittance P 7,650 30 A Sales P22,500 Less Cost (15 x P900) P13,500 Expenses (P2,250 + P1,125 + P3,375) 6,750 20,250 Consignment profit P 2,250 31 D Sales P10,800 Less: Cost (P8,400 x 9/12) P6,300 Freight-out (P720 x 9/12) 540 Delivery 450 Commission 2,160 Advertising 500 3,650 Net income P 850 32. B P10,800 – P450 – P2,160 – P500 = P7,690 33 B P9,120 x 3/12 = P2,280 34. C Net income P 426 Expenses: Freight (P240 x 6/10) P 144 Advertising 150 Commission 480 774 Gross profit P1,200 Less Sales 2,400
Cost of goods sold P1,200
35 B Cost per unit (P1,200 / 6 units) P200
Unsold units x 4
Total cost of unsold units P800
Inventoriable cost – freight (P240 x 4/10) 96
Total cost P896
36. A Remittance P3,165
Charges: Advertising P120
Delivery 75 195
Total proceeds from sales, net of 20% commission P3,360
÷ 80%
Total sales price of the 7 handbags P4,200
37 C Cost (3 x P300) P 900
Advertising ( 3/10 x P120) 36
Inventory of unsold handbags P 981
38 B Sales P4,200 Cost of sales (7 x P300) 2,100 Gross profit P2,100 Expenses: Freight ( 7/10 x P150) P 105 Commission (4,200 x 20%) 840 Advertising ( P120 x 7/10) 84 Delivery 75 1,104
Net income on the consignment P 996
39. B Sales (80 x P1,500) P120,000
Charges:
Cost of returning defective units P 100
Transportation 350 Insurance 200 Commissions (P120,000 x 20%) 24,000 Reconditioning cost 150 24,800 Balance P 95,200 Advances (80 + 10) x P300 27,000 Remittance P 68,200 40 D Sales P120,000 Cost of sales (80 x P500) 40,000 Gross profit P 80,000 Expenses: Transportation (90/120 x P1,500) P 1,125 Insurance 900
Cost of returning defective units 100
Transportation of consignee (90/120 x P350) 265 Insurance – consignee (90/120 x P200) 150 Insurance loss (P500 x 10% x 10) 500 Commission 24,000 Reconditioning cost 150 27,190 Profit on consignment P 52,810
