P2_104_Consignment Sales and Corporate Liquidation_key Answers

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES PRACTICAL ACCOUNTING 2 2013-2014

CONSIGNMENT SALES / CORPORATE LIQUIDATION P2 - 104 CONSIGNMENT SALES Problem 1. Paul, Inc., agrees to transfer television sets to Walker Bros. on a consignment basis. The consignee is to sell a set at 40% above cost exclusive of freight and is to receive a 10% commission on sales price. The consignor agrees to reimburse the consignee for all expenses related to the consignment. The agreement also calls for an advance payment by the consignee of 30% per set based on selling price; the said advance is to be deducted as settlement is made for each set sold. The consignee is to provide an account sales quarterly and is to make cash remittance for the amount owed at that time. The following consignment sales activities occurred during the October 1 to December 31 of current year: Sets shipped – 100; Unit cost each set – P 10,000; Freight charges on the shipment paid by the consignor – P 75,000; The consignee made advance payments on the sets received; Advertising cost paid by the consignee – P 50,000 The consignee sold 80 sets for cash; expenses of delivery and installation were P 25,000. After notifying the consignor with the total sets sold for the period, the consignee returned 10 sets representing a model that could not be sold and paid freight charges of P 8,000 on the return. Determine the following: 1. The amount remitted by the consignee. a. P 933,000 b. P 709,000

c. P 701,000

d. P 547,000

2. The value of the remaining 20 sets of inventory unsold. a. P 200,000 b. P 223,000

c. P 215,500

d. P 207,500

3. Net income by the consignor as a result of the above transactions. a. P 57,500 b. P 73,000 c. P 125,000

d. P 133,000

Problem 2. GEL Company consigned 10 refrigerators to MARK Sales Company. Each refrigerator cost P12,000. The freight on the shipment amounting to P500 each was paid by GEL. Western Sales Company returned 1 unit to GEL in good condition (wrong unit delivered). MARK Sales Company paid P200 for the shipment of the returned unit. MARK Sales Company reported that only 8 units were sold at a price that yield 25% gross profit rate. MARK Sales Company remitted the amount due to GEL Company after deducting 20% commission and freight of the returned units. Questions: 1. The amount remitted by MARK Sales Company amounted to: a. P 102,400

b. P 128,000

c. P 102,200

d. P 122,250

2. The net profit to be recognized by GEL Company on the above consignment amounted to: a. P 1,700

b. P 1,500

c. P 2,200

d. P 2,300

Problem 3. In consignment sales, the consignor may prefer the consignment of goods to dealers over direct sale for the following reasons, except a. The consignment may be the only way in which a wider marketing area can be secured by a producer, manufacturer, or distributor. b. Selling specialists may be obtained by the consignor, particularly for sale of grain, livestock, and produce.

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c. The consignor can recover unsold goods or the proceeds from sales from the consignee even though the, latter becomes insolvent or bankrupt. d. The risks of physical deterioration as well as price fluctuation are avoided.

COORPORATE LIQUIDATION Problem 1. The following data were taken from the statement of realization and liquidation of Anne Company for the quarter ended September 30, 2013: Liabilities to be liquidated P1,425,000 Supplementary charges

845,500

Liabilities not liquidated

1,050,000

Supplementary credits

962,500

Assets acquired

680,000

Liabilities liquidated

790,000

Assets to be realized

537,500

Assets realized

875,000

Liabilities assumed

415,000

The beginning balances of ordinary shares and retained earnings are P510,000 and P148,000, respectively. The net income for the period is P437,000. How much is the ending cash balance? a. P1,545,500 b. P1,482,500 c. P1,045,500 d. P1,465,000 Problem 2. The following information are related to John Loyd Corporation which is undergoing liquidation: a. Bonds payable amounting to P73,600 is secured by merchandise inventory with book value of P123,000 and net realizable value of 2/3 of recorded amount. b. Of the P195,600 accounts payable, P55,000 is secured by equipment with carrying amount of P76,800 which is 70% realizable. c. Building with carrying amount of P129,000 has a net realizable value of P99,000. d. Other unrecorded liabilities are accrued interest on bonds, P3,100; salaries payable, P17,400; taxes payable, P11,600 and trustee’s fee, P8,500. e. Cash available prior to liquidation amounts to P11,900. f. Total assets of John Loyd Corporation presented in the Statement of Financial Position prior to liquidation amounts to P480,000. Remaining assets other than those whose realizable value were mentioned above have NRV of 60% of recorded amount, except for prepaid expenses and goodwill amounting to P7,600 and P22,000, respectively g. Total liabilities of the company prior to liquidation amounts to P380,000. Compute for the estimated deficiency to unsecured liabilities. a. P108,120 b. P120,020 P67,520

c. P90,360

d.

Problem 3. Prive’ Company has been undergoing liquidation since January 1. As of June 30, its condensed Statement of Realization & Liquidation is presented below: Assets realized Interest on investment Purchases Assets acquired Liabilities assumed Payment of expenses of trustee Liabilities to be liquidated

P105,000 525 6,250 17,500 5,250 26,250 227,500

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Sales on account Assets not realized Liabilities not liquidated Sales for cash Assets to be realized Liabilities liquidated

P17,500 147,000 111,475 87,500 332,500 122,500

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The net gain (loss) on realization and liquidation is a. P61,250 b. (P61,250) c. P26,200 d. (P26,200) Problem 4. The following information was taken from the Statement of Affairs of CAPITOL Corp. Assets pledged to fully secured liabilities (fair value of P375,000) Assets pledged to partially secured liabilities (fair value of P260,000) 370,000 Free assets (current fair value of P200,000) 350,000 Fully secured liabilities Partially secured liabilities 300,000 Unsecured liabilities with priority Unsecured liabilities without priority The amount to be paid to partially secured creditors is a. P285,000 b. P281,000 P263,50

P450,000

150,000 35,000 560,000

c. P286,000

d.

Problem 5. The following data were taken from Statement of Affairs of PACman Company: Shareholders’ equity 441,000 Bonds payable without security Salaries

735,000 50,000

Loss on assets realization

551,250

Accounts payable without security

367,500

Taxes

72,500

Trustee expenses

55,125

How much is the total free assets? a. P992,250 b. P953,575 P1,059,625

c. P1,114,750

d.

Problem 6. The following data were taken from the Statement of Affairs of Henares Company: Assets pledged to fully secured liabilities Assets pledged to partially secured liabilities 157,500 Free assets Fully secured liabilities Partially secured liabilities 192,500 Unsecured liabilities with priority Unsecured liabilities without priority

218,750 152,250 175,000 22,750 157,500

Which of the following is correct? a. Fully secured liabilities; estimated amount to be received is P218,750 b. Partially secured liabilities; estimated amount to be received is P192,500 c. Unsecured liabilities with priority; estimated amount to be received is P20,475 d. Unsecured liabilities without priority; estimated amount to be received is P141,750 Problem 7. Fast & Furious Inc. is insolvent and its statement of affairs show: Estimated gain on realization of assets, P2,000,000; Estimated loss on realization of assets, 2,560,000; Additional assets, P1,280,000; Additional liabilities, P960,000; Capital Stock, P12,000,000; Deficit, P11,200,000.

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The pro-rata payment to stockholders on the peso is: a. P0.70 b. P0.43

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c. P0.30

d. P0.57

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