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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
31,200
24,000
Merchandise Inventory
Inventory on Consignment
To record return of consigned goods.
66,000
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
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
page 2
42,000
378,000
362,880
420,000
362,880
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
P 90,000
177,120
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
2.
3.
page 3
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
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
4.
5.
page 4
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
185,400
P 3,600
P173,250
P135,000
8,100
1,080
144,180
P 29,070
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
2.
page 5
P60,000
1,100
5,000
P66,100
PROBLEMS
Problem 5-1
Req. 1. Books of consignee; consignment sales merged with regular sales
April
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
page 6
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
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
5.
page 7
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.
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
page 8
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
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
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
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
page 9
Income Tax
2,400
1,280
715,600
420,100
89,160
206,340
72,219
page 10
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.
P107,500
2,100
P105,400
6.
P24,860
7.
P168,000
P 3,000
25,200
28,200
8.
9.
10.
C
B
page 11
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
Cost (6 x P4,000)
Freight (P1,600 x 6/10)
Balance of Merchandise on Consignment account
P24,000
960
P24,960
12
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.
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
page 12
14
P 8,000
800
120
P 8,920
15.
Remittance
Charges:
Cartage
Advertising
Delivery and installation
Total
P54,600
P 600
3,600
2,400
Sales
16
17.
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
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
20
63,240
P 8,760
P68,250
8,250
P76,500
85%
P90,000
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
21
22
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
24
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
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
page 13
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
page 14
28.
15 units
29
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
32.
33
34.
Net income
Expenses:
Freight (P240 x 6/10)
Advertising
Commission
Gross profit
Less Sales
Cost of goods sold
35
36.
Remittance
Charges: Advertising
Delivery
Total proceeds from sales, net of 20% commission
37
14,850
P 7,650
P22,500
20,250
P 2,250
P10,800
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
195
P3,360
80%
P4,200
Cost (3 x P300)
Freight (3/10 x P150)
P 900
45
38
39.
40
page 15
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
P 105
840
84
75
1,104
P 996
P120,000
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