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 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