Consignment Sales - Advacc 1 Lupisan-baysa

CHAPTER 5 SUGGESTED ANSWERS EXERCISES Exercise 5 – 1 1. Inventory on Consignment Merchandise Inventory To record transfer of merchandise to consignee. 2.

3.

4.

5.

90,000 90,000

Consignee Receivable (P24,000 x 130%) Consignment Sales Revenue To record consignment sales.

31,200

Cost of Consignment Goods Sold Inventory on Consignment To record cost of goods sold.

24,000

Merchandise Inventory Inventory on Consignment To record return of consigned goods.

66,000

Commission Expense (P31,200 x 10%) Cash Consignee Receivable

3,120 28,080

31,200

24,000

66,000

31,200

or 2.

3.

4.

Commission Expense Cash Consignment Sales Revenue

3,120 28,080

Cost of Consignment Goods Sold Inventory on Consignment To record cost of goods sold.

24,000

Merchandise Inventory Inventory on Consignment To record return of consigned goods.

66,000

Exercise 5 – 2 1. Consignor Books: Inventory on Consignment Finished Goods Inventory Inventory on Consignment Cash Consignee Payable

31,200 24,000

66,000

500,000 500,000 40,000 30,000 10,000

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Commission Expense (P420,000 x 10%) Consignee Receivable Consignment Sales

42,000 378,000

Cost of Consignment Goods Sold Inventory on Consignment

362,880

420,000 362,880

*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 Consignee Payable Consignee Receivable 2.

278,000 10,000 288,000

Consignee Books: Memorandum entry to record receipt of goods on consignment. Consignor Receivable Cash

10,000

Cash Consignor Payable

420,000

10,000 420,000

Consignor Payable Commission Revenue

42,000

Consignor Payable Cash Consignor Receivable

288,000

42,000 278,000 10,000

3. Consignor financial statements: Statement of Financial Position – Assets section Consignee receivable Inventory on consignment

P 90,000 177,120

Statement of Recognized Income and Expenses Consignment sales P420,000 Less Cost of consignment sales 362,880 Commission expense Profit from consignment

P57,120 42,000 P15,120

Exercise 5-3 Requirement 1 – Consignment profits calculated separately Books of Consignor 1. Consignment –Out Merchandise Shipment on Consignment

7,000 7,000

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3.

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Cash Consignment-Out Consignment-Out

3,500 2,500

Consignment-Out Consignment Income Sales (4 sets @P1,500) CGS (4 sets @P700) Freight-in (4/10 x P1,000) Commission (25% x P6,000) Consignment income

1,300

6,000 1,300 P6,000 ( 2,800) ( 400) ( 1,500) P1,300

Books of Consignee 1. Received 10 sets of electric fan from Ledesma ………… 2. 3. 4. 5.

Consignment-In Cash

1,000

Cash Consignment-In

6,000

Consignment-In Consignment Income

1,500

Consignment-In Cash

3,500

1,000 6,000 1,500 3,500

Requirement 2 – Consignment profits not calculated separately Books of Consignor 1. Shipped merchandise to Amoranto, a consignee, ……… 2.

3.

Cash Freight Commission Expense Merchandise on Consignment Sales

3,500 400 1,500 600

Merchandise on Consignment Income Summary Unsold merchandise on consignment (6 sets @P700)

4,200

Books of Consignee 1. Received 10 sets of electric fan from Ledesma, a consignor.. 2. 3.

6,000 4,200

………………..

Ledesma Cash

1,000

Cash Sales

6,000

1,000 6,000

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Purchases (P6,000 – P1,500 commission) Ledesma

4,500

Ledesma Cash

3,500

4,500 3,500

Exercise 5 – 4 1. Sales of laser discs, net of commissions and cartage Less: Cost Freight and handling Loss on laser discs consignment 2.

P181,800 P180,000 5,400

Sales of TV sets, net of commissions and delivery & installation costs Less: Cost (15 x P9,000) Freight and handling [(15 + 3*)/24** x P10,800] Freight on return of defective units Profit on TV sets on consignments

185,400 P 3,600 P173,250

P135,000 8,100 1,080

144,180 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) Cost of sales (400 x P600) Gross profit Expenses: Freight (400/500 x P5,500) Safety devices (100/200 x P10,000) Commission (P410,000 x 10%) Delivery cost Consignment profit

P410,000* 240,000 P170,000 P 4,400 5,000 41,000 4,500

54,900 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 Sales of units without safety device (300 x P600) Sales of units with safety device Units sold (P110,000 / P1,100)

P410,000 300,000 P110,000 100

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Cost (100 x P600) Freight (100/500 x P5,500) Safety device (100/200 x P10,000) Inventory cost of consigned goods

P60,000 1,100 5,000 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. Cash

1,750

Accounts Receivable Sales

24,000

Purchases CCM Corp.

20,000

Cash Accounts Receivable

10,000

CCM Corp. Cash May

1,750

24,000 20,000 10,000 5,000 5,000

Accounts Receivable Sales

18,000

Purchases CCM Corp.

15,000

Cash Accounts Receivable

15,000

18,000 15,000 15,000

CCM Corp. Cash Req. 2 – Books of consignor; consignment profits calculated separately

10,000

April

Consignment-Out Merchandise Inventory

36,000

Cash Consignment – Out Receivable – Consignee Consignment – Out

5,000 1,750 13,250

Consignment – Out Consignment Income

4,900

10,000

36,000

20,000 4,900

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Sales (8 sets @P2,500) CGS (8 sets @P1,800) Freight-in (P1,000 x 8/20) Cartage-in (P750 x 8/20) Consignment profit May

P 20,000 ( 14,400) ( 400) ( 300) P 4,900

Cash Receivable – Consignee Consignment – Out

10,000 5,000 15,000

Consignment – Out Consignment Income Sales (6 sets @P2,500) CGS (6 sets @P1,800) Freight-in (P1,000 x 6/20) Cartage-in (P750 x 6/20) Consignment profit

3,675 3,675 P15,000 ( 10,800) ( 300) ( 225) P 3,675

3. Charge and Profit analysis

Charges by consignor: Cost of consigned goods Charges by consignee Freight-in Cartage-in Total Sales price Consignment profit

April Inventory

Sales

May Inventory

Total

Sales

P36,000

P14,400

P21,600

P10,800

P10,800

1,000 750 P37,750

400 300 P15,100 20,000 P 4,900

600 450 P22,650

300 225 P11,325 15,000 P 3,675

300 225 P11,325

Problem 5-2 Books of consignor 1. 2. 3.

4.

Consignment – Out Merchandise Shipment on Consignment Consignment – Out Cash Cash Consignment – Out Receivable – Consignees Consignment – Out Merchandise Shipment on Consignment Consignment – Out Returned merchandise (4 sets @P1,000)

50,000 50,000 750 750 5,000 10,600 16,400 32,000 4,000 4,000

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Consignment – Out Consignment Income

5,700 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. 3.

Accounts Receivable Consignment – In

32,000

Cash Accounts Receivable P32,000 – P16,400 (collectible) = P15,600

15,600

32,000 15,600

4.

Returned four (4) defective cordless phones…………….

5.

Consignment – In Delivery and Installation Expense Commission on Consignment Cash Remittance

15,600 1,600 8,000 5,000

Problem 5-3 Correcting entry to bring accounts with Alejo up to date Consignment Commissions Freight on Consignment Shipments (P2,600 x 65/100) Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100) Consignment Sales Alejo Account sales – Alejo Sales (65 stoves @ P3,600) Commission (25% of P234,000) Freight Amount owed Total amount remitted

P234,000 ( 58,500) ( 2,600) P172,900 ( 187,900)

58,500 1,690 910 6,000 67,100

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Balance-charge against Sunstar P 15,000 Entry that should have been made for transactions of Alejo on the books of consignor: Cash Consignment Commission Freight on Consignment Shipments Prepaid Expenses on Consigned Merchandise Consignment Sales Alejo

187,900 58,500 1,690 910 234,000 15,000

Net effect of entries already made with Alejo for transfer of merchandise and remittance Cash Alejo Consignment Sales

187,900 52,100 240,000

Correcting entry to bring accounts with Burgos up to date Consignment Commissions Freight on Consignment Shipments (P2,600 x 65/100) Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100) Consignment Sales Burgos

Account sales – Burgos Sales (15 stoves @ P3,600) Commission (25% of P54,000) Freight Amount owed Total amount remitted Balance-amount owed Sunstar

13,500 750 1,250 42,000 57,500

P54,000 ( 13,500) ( 2,000) P38,500 ( 11,500) P27,000

Entry that should have been made for transactions of Burgos on the books of consignor: Cash Consignment Commission Freight on Consignment Shipments Prepaid Expenses on Consigned Merchandise Burgos Consignment Sales

11,500 13,500 750 1,250 27,000 54,000

Net effect of entries already made with Burgos for transfer of merchandise and remittance Cash Burgos Consignment Sales Problem 5-4 Entries to bring account with Domingo up to date

11,500 84,500 96,000

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1.

2.

3.

Cash Operating Expenses Receivables-Consignees Remittance for 10 sets less charges

5,100 900

Sales Receivables – Consignees Unsold units previously recognized as sales.

3,000

Merchandise in Transit Cost of Goods Sold Merchandise returned and still in transit.

1,600

Entries to bring account with Estrella up to date 1. Cash Merchandise on Consignment Operating Expenses Receivables – Consignees 2.

3.

4.

3.

3,000

1,600

13,400 600 1,000 15,000 9,000

Merchandise on Consignment Cost of Goods Sold Unsold units in the hands of consignee

4,800

Merchandise on Consignment Operating Expenses Expenditures related to unsold consigned goods charged to expense

1,700

9,000

4,800

1,700

960 600 360

Sales Receivables – Consignees

2,400

Merchandise in Transit Receivables – Consignees

1,280

Closing Entries 1. Sales Cost of Goods Sold Operating Expenses Income Summary 2.

6,000

Sales Receivables – Consignees

Entries to bring account with Fajardo up to date 1. Operating Expenses Receivables – Consignees Accounts Payable 2.

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Income Tax

2,400 1,280 715,600 420,100 89,160 206,340 72,219

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Income Tax Payable 3. 4.

72,219

Income Summary Income Tax

72,219 72,219

Income Summary Retained Earnings

134,121 134,121

2. Moonstar Company Statement of Financial Position December 31, 2008 Current assets: Cash Receivables – Consignees Inventories: On hand In transit On consignment Total Current Assets Plant and Equipment Total Assets

P134,000 62,720 P112,000 2,880 7,100

Current Liabilities: Accounts Payable Income Tax Payable Ordinary Share Capital, P100 par Retained Earnings Balance, beginning Net income for 2008 Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity

121,980 318,700 170,000 P488,700

P25,360 72,219 P200,000 P 57,000 134,121

191,121 391,121 P488,700

MULTIPLE CHOICE 1. 2 3. 4.

A C A A

5.

A

Receipts (215 x P500) Less Shipping charges Remittance

P107,500 2,100 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) Charges: Expenses Commissions (15% x P168,000)

P168,000

P180,000 + P9,000 = P189,000

P 3,000 25,200

28,200

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9. 10.

C

C B

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Remittance

P139,800

Sales 7 x 12 x P2,000 Cost of Sales 7 x 12 x P1,000 Freight 7 x P30 Expenses Commission P168,000 x 15%

P168,000

Sales ( 4 x P7,000) Charges: Commission (20% x P28,000) Freight Remittance

P84,000 210 3,000 25,200

112,410 P 55,590 P28,000

P5,600 1,600

7,200 P20,800

11

D

Cost (6 x P4,000) Freight (P1,600 x 6/10) Balance of Merchandise on Consignment account

P24,000 960 P24,960

12

D

Sales Cost (4 x P4,000) Gross profit Less: Commission Freight (P1,600 x 4/10) Net profit on consignment

P28,000 16,000 P12,000

13.

B

Remittance Charges: Delivery expense Repairs Total Sales Cost of sales Gross profit Expenses: Commission (P79,800 x 15%) Repairs (P2,000 x 60/100) Delivery Shipping cost (P900 x 260/300) Consignment profit *Sales Less Sales of units with defects (200 x P300) Sales of repaired units Selling price of repaired units Number of repaired units that were sold Units sold without repairs Total number of units sold Unit cost Cost of sales

P5,600 640

6,240 P 5,760 P64,980

P 850 2,000

P11,970 1,200 850 780 P79,800 60,000 P19,800 ÷ P330 60 240 300 x P200 P52,000

2,850 P67,380 ÷ 85% P79,800 52,000* P27,800

14,800 P13,000

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14

B

Cost (40 x P200) Repairs (P2,000 x 40/100) Shipping cost (P900 x 40/300) Value of inventory on consignment

P 8,000 800 120 P 8,920

15.

D

Remittance Charges: Cartage Advertising Delivery and installation Total

P54,600 P 600 3,600 2,400

Sales 16

17.

C

D

Sales Cost and expenses: Cost (6 x P7,200) Freight (P4,800 x 6/10) Cartage (P600 x 6/10) Advertising Delivery and installation Commission (15% x P72,000) Consignment income

P72,000 P43,200 2,880 360 3,600 2,400 10,800

Remittance Consignee charges, excluding the 15% commission (P4,500 + P3,000 + P750) Sum of remittances and charges

A

Sales Cost of sales (6 x P9000) Gross profit Expenses: Commission (P90,000 x 15%) Freight-out (P6,000 x 6/10) Marketing expense Delivery and installation Cartage (P750 x 6/10) Net profit from the sale of consigned goods

19

D

P90,000 x 15% = P13,500

20

A

Sales collected [(2 x P1,500) + (1 x P1,800 x 25%)] Commission (P3,450 x 15%) Remittance

63,240 P 8,760 P68,250 8,250 P76,500 ÷ 85% P90,000

Sales price of 6 refrigerators 18

6,600 P61,200 ÷ 85% P72,000

P90,000 54,000 P36,000 P13,500 3,600 4,500 3,000 450

25,050 P10,950

P3,450 720 P2,730

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22

C

B

Sales Cost of sales ( 3 x P800) Gross profit Expenses: Trucking (P200 x 3/5) Delivery Commission Profit resulting from consignment Sales Cost (7 x P2,000) Gross profit Expenses: Advertising Commission Freight (P600 x 7/10) Net income on the consignment

23

C

( 3 x P2,000) + (P600 x 3/10) = P6,180

24

D

Remittance Charges by consignor Cost (P3,840 x 30/48) Freight and handling (P1,000 x 30/48) Freight and handling charged by consignee Net income

25

C

26.

27.

T-shirts: Cost (P3,840 x 18/48) Freight and handling (P1,000 x 18/48) Baby dresses: Cost (P2,400 x 4/24) Freight and handling (P540 x 4/24) Cost of the inventory in the hands of consignee Sales Cost of sales (P90,000 x 7/10) Gross profit Expenses: Freight (P3,000 x 7/10) Commission Cartage-in (P1,050 x 7/10) Profit on consignment of TV sets

C

TV sets (P94,050 x 3/10) DVD sets (P84,450 x 2/5) Cost of inventory in the hands of consignee

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P4,800 2,400 P2,400 P120 170 720

_____ P1,390 P21,000 14,000 P 7,000

P1,000 4,200 420

5,620 P 1,380

P3,750 P2,400 625 75

P1,440 375 P 400 90

3,100 P 650

P1,815 490 P2,305 P84,000 63,000 P21,000

P2,100 8,400 735

11,235 P 9,765 P28,215 33,780 P61,995

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28.

A

P3,375 / 15% = P22,500 / P1,500

15 units

29

C

Sales (15 x P1,500) Less: Advertising Delivery expense Commission Advances (150 x P900 x 60% x 15/150) Remittance

P22,500 P2,250 1,125 3,375 8,100

Sales Less Cost (15 x P900) Expenses (P2,250 + P1,125 + P3,375) Consignment profit

P13,500 6,750

Sales Less: Cost (P8,400 x 9/12) Freight-out (P720 x 9/12) Delivery Commission Advertising Net income

P6,300 540 450 2,160 500

30

31

A

D

32.

B

P10,800 – P450 – P2,160 – P500 = P7,690

33

B

P9,120 x 3/12 = P2,280

34.

C

Net income Expenses: Freight (P240 x 6/10) Advertising Commission Gross profit Less Sales Cost of goods sold

35

B

Cost per unit (P1,200 / 6 units) Unsold units Total cost of unsold units Inventoriable cost – freight (P240 x 4/10) Total cost

36.

A

Remittance Charges: Advertising Delivery Total proceeds from sales, net of 20% commission

37

C

14,850 P 7,650 P22,500 20,250 P 2,250 P10,800

P

3,650 850

P 426 P 144 150 480

774 P1,200 2,400 P1,200 P200 x 4 P800 96 P896 P3,165

P120 75

Total sales price of the 7 handbags

195 P3,360 ÷ 80% P4,200

Cost (3 x P300) Freight (3/10 x P150)

P 900 45

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39.

40

B

B

D

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Advertising ( 3/10 x P120) Inventory of unsold handbags

36 P 981

Sales Cost of sales (7 x P300) Gross profit Expenses: Freight ( 7/10 x P150) Commission (4,200 x 20%) Advertising ( P120 x 7/10) Delivery Net income on the consignment

P4,200 2,100 P2,100

Sales (80 x P1,500) Charges: Cost of returning defective units Transportation Insurance Commissions (P120,000 x 20%) Reconditioning cost Balance Advances (80 + 10) x P300 Remittance Sales Cost of sales (80 x P500) Gross profit Expenses: Transportation (90/120 x P1,500) Insurance Cost of returning defective units Transportation of consignee (90/120 x P350) Insurance – consignee (90/120 x P200) Insurance loss (P500 x 10% x 10) Commission Reconditioning cost Profit on consignment

P 105 840 84 75

1,104 P 996 P120,000

P

100 350 200 24,000 150

24,800 P 95,200 27,000 P 68,200 P120,000 40,000 P 80,000

P 1,125 900 100 265 150 500 24,000 150

27,190 P 52,810