Unit II Revenue Recognition
This module account for Revenue on Instalment Sales, Consignment Sales.
Revenue from Construction Contracts and Revenue from Franchising.
Module 5 Revenue Recognition: Instalment Sales and Consignment Sales
The module present the accounting procedure under instalment sales,
wherein gross profit is initially deferred and periodically recognized as the instalment
payments are received.
Included in the module is consignment sales, which is applicable to
Consignment arrangement. The consignor recognizes revenue only when the
consignee sells the consigned goods to end users.
A. Instalment Sales:
Learning objectives: The student should be able to
a. Explain the applicability of the “instalment sales method” of recognizing revenue.
b. Apply the method of instalment
B. Consignment Sales
Learning objectives; The student should be able to
a. Define the consignment arrangement.
b. Apply the PFRS 15 in recognizing revenue from a consignment arrangement.
SAQ # 1
1. Paral Company began operations on January 2, 20x4, and appropriately used the
installment sales method of accounting. The following data are available for 20x4
and 20x5:
20x4
20x5
Installment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P P3,600,000
...
3,000,000
Gross profit on sales . . . . . . . . . . . . . . . . . . . . . . . . 30%
40%
....
Cash collections from:
20x4 sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P1,200,000
....
P1,000,000
20x5 sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-- P1,400,000
....
The realized gross profit for 20x5 is:
2. Daily, Inc. appropriately used the installment method of accounting to recognize
income in its financial statement. Some pertinent data relating to this method of
accounting include:
20x4
20x5
Installment sales
P750,000
P900,000
Cost of sales
450,000
630,000
Gross profit
P300,000
P270,000
Collections during year:
On 20x4 sales
250,000
250,000
On 20x5 sales
300,000
What amount to be realized gross profit should be reported on Daily’s income
statement for 20x5?
3.
Assume the Randall Corporation sold P30,000 worth of merchandise on the
installment basis. The cost of the merchandise was P24,000, and collectability of
the receivable is uncertain. Collection in the current year on the account is
P8,000. How much gross profit should be reported as realized?
Use the following information for questions 4 to 6:
Kamus Medical Center uses the cost recovery method in accounting
revenue. The following information is available:
20x5
20x6
Sales .................................... P 45,000
P 60,000
Gross profit percentage…
37%
41%
Cash collections:
20x5 .................................. P 24,000
P 19,000
20x6 ................................
40,000
20x7 ..................................
for recognizing
20x7
P 85,000
40%
P 2,000
17,000
53,000
4. Determine the amount of gross profit to be recognized for 20x5.
5. Determine the amount of gross profit to be recognized for 20x6.
6. Determine the amount of gross profit to be recognized for 20x7.
7. Leno Distribution, which began operating on January 1, appropriately uses the
installment method of accounting. The following information pertains to Leno's
operations for the first year:
Installment sales . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . .P1,000,000
.
Cost of installment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600,000
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Collections on installment sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
The balance in the deferred gross profit account at December 31 should be:
8. Piper Co. began operations on January 1, 20x4 and appropriately uses the
installment method of accounting. The following information pertains to Piper's
operations for 20x4:
Installment sales…………………………………………………..P1,800,000
Cost of installment sales……………………………………………1,080,000
General and administrative expenses…..…………………………..180,000
Collections on installment sales……..……………………………….825,000
The balance in the deferred gross profit account at December 31, 20x4 should
be:
9. The Cindy, Inc. began operating at the beginning of the calendar year 20x4 and,
using the installment method of accounting, presented the following data for the
first year:
Installment sales . . . . . . . . . . . . . . . . . . . . . . . . . .
P 400,000
Gross margin based on cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66-2/3%
..
Inventory, Dec. 31, 20x4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000
.
General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . 40,000
Accounts receivable, Dec. 31, 20x4 . . . . . . . . . . . . . . . . . . . . . . .320,000
.
The balance of the deferred gross profit account, end of 20x4 should be:
10. Ft. Myers Co. began business on January 1, 20x3. The company uses the
installment method. Additional information follows:
20x4
20x3
Installment sales
P160,000
P184,000
Cost of installment sales
136,000
158,240
General and administrative expenses
20,000
8,400
Cash receipts on installment method sales
20x3 sales
40,000
89,600
20x4 sales
36,800
Compute the balance of Deferred Gross Profit at December 31, 20x4.
Use the following information for questions 11 to 14:
On January 1, 20x4, Panama City Realty sold land for P2,000 that had originally cost
P1,600. A 5% down payment was received. Further cash collections were as follows:
20x5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
P 600
20x6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,200
20x7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100
11. Compute the amount of realized profit for the year 20x5 under the full accrual
method.
12 . Compute the amount of realized profit for the year 20x6 under the installment
sales method.
13. Compute the amount of realized profit for the year 20x7 under the sunk cost
method
14. A corporation sold goods for P10 million during 20x4. Of this amount, P6 million
were in cash, and P4 million was on account. However, the company collected P2
million of the sales on account during 20x4. In conformity with the revenue
principle, the amount of revenue that should be recognized in 20x4 is:
Use the following information for questions 15 and 16:
A firm uses the installment method of revenue recognition on an item with a cash
selling price of P1,000 and cost of P600. During the year of sale, the firm received
P250 from the customer.
15. The net installment account receivable (net of deferred gross profit) at the end of
the year of sale?
16. Thereafter, no more cash is received. The firm repossesses the item, worth
P500 at that time. The entry to record the repossession includes
ASAQ #1
Solutions
1. P920,000
20x4: P1,200,000 x 30% = P 360,000
20x5: P1,400,000 x 40% =
560,000
P920,000
2. P190,000
(P300,000 ÷ P750,000) x P250,000 = P100,000
[(P270,000 ÷ P900,000) x P300,000] + P100,000 = P190,000
3. P1,600– assume the use of installment sales method. It should be noted that if
the collectability is highly uncertain or extremely uncertain, the use of cost
recovery method is preferable.
4. Zero/Nil
When the cost recovery method is used, gross profit is recognized only after all
costs have been recovered.
20x5
P45,000 x 63% = P28,350
Cost of sale
P28,350 - P24,000 = P4,350
No gross profit is recognized in 20x5.
Costs still to be recovered.
5. P19,250
20x6
Relating to 20x5 sales:
P19,000 - P4,350 =
P14,650
Gross profit recognized
Relating to 20x6 sales:
P60,000 x 59% = P35,400
P40,000 - P35,400 =
Cost of sale
4,600
P19,250
Gross profit recognized
Recognized in 20x6
6. P21,000
20x7
Relating to 20x5 sales:
Since all costs have been
recovered, all cash collected is
recognized as gross profit ......
P 2,000
Relating to 20x6 sales:
Since all costs have been
recovered, all cash collected is
recognized as gross profit ......
17,000
Relating to 20x7 sales:
P85,000 x 60% = P51,000
P53,000 - P51,000 = ..........
Cost of sale
2,000
Gross profit
recognized
P21,000
Recognized in 20x7
7. P320,000
[(P1,000,000 – P200,000) x (P1,000,000 – P600,000)/P1,000,000 = P320,000
8.
P390,000
P1,800,000 – P1,080,000 = P720,000 (40% gross profit rate)
P720,000 – (P825,000 x 40%) = P390,000.
9. P 128,000
Installment Accounts Receivable, end of 20x4
P 320,000
x: Gross profit rate (66 2/3 / 166 2/3)
_____40%
Deferred Gross Profit, end of 20x4
P 128,000
10. P25,168, determined as follows:
Gross profit percentages:
20x3: P136,000/P160,000 = 85%; 100% x 85% = 15%
20x4: P158,240/P184,000 = 86%; 100% x 86% = 14%
To deferred gross profit:
20x3: P160,000 x P136,000 =
20x4: P184,000 x P158,240 =
Gross profit realized:
0.15 x P40,000 =
0.15 x P89,600 =
0.14 x P36,800 =
P24,000
25,760
P49,760
P 6,000
13,440
5,152
P24,592
Balance of Gross Profit Deferred:
P49,760 - P24,592 = P25,168
11. P
0 – all profit recognized in 20x5
12. P240 – (P1,200/P2,000) x P400
13. P100 - (100% of costs were fully recovered prior to 20x7
14. P10 million, the amount of sale
15 . P450 – [P1,000 – P250 = P750 – (P750 x 400/1,000)] = P450
16. P50 gain
Repossessed merchandise……………………………………… 500
Deferred gross profit……………………………………………… 300
Installment Accounts receivable……………………..
Gain on repossession……………………………………
750
50
Activity # 1
1. Compute the amount of realized gross profit for the year 20x4.
2 Compute the amount of realized gross profit for the year 20x5.
3. Compute the amount of realized gross profit for the year 20x6.
Use the following information for questions 4 and 5:
A company incurred the following costs and received the following collections from
customers:
Costs
Collections
20x4. . . . . . . . . . . . . . . . . . . . . . . . . . .
P120,000
P
0
20x5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20,000
80,000
20x6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20,000
40,000
20x7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,000
100,000
20x8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0
0
4. If the company used the cost recovery method of revenue recognition, the income
that should be recognized in 20x6 is ___________________.
5. If the cost recovery method continues to be used through 20x7, the amount of 20x7
income that should be recognized is ____________________.
Use the following information for questions 6 to 10:
Johnson Enterprises uses the cost recovery method of construction accounting for
all installment sales. Complete the following table:
20x4
20x5
20x6
Installment sales . . . . . . . . . . . . . . . . . . . .
P 80,000 P 95,000 P
?
Cost of installment sales . . . . . . . . . . . . . . .. . . . . .
?
56,050
68,250
Gross profit percentage . . . . . . . . . . . . . . . . . . . . . 38%
?
35%
Cash collections:
20x4 sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,600
46,400
5,600
20x5 sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22,800
?
20x6 sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32,550
Realized Gross Profit on Installment Sales . . . . . .
?
?
16,050
6. The installment sales in 20x6:
7. The cost of installment sales in 20x4:
8. The collections in 20x6 for 20x5 sales:
9. The realized gross profit on installments sales in 20x4:
10. The realized gross profit on installments sales in 20x5:
Use the following information for questions 11 to 14:
Lake Power Sports sells jet skis and other powered recreational equipment.
Customers pay 1/3 of the sales price of a jet ski when they initially purchase the ski,
and then pay another 1/3 each year for the next two years. Because Lake has little
information about collectability of these receivables, they use the cost recovery
method to recognize revenue on these installment sales. In 20x4 Lake began
operations and sold jet skis with a total price of P900,000 that cost Lake P450,000.
Lake collected P300,000 in 20x4, P300,000 in 20x5, and P300,000 in 20x6
associated with those sales. In 20x5 Lake sold jet skis with a total price of
P1,500,000 that cost Lake P900,000. Lake collected P500,000 in 20x5, P400,000 in
20x6, and P400,000 in 20x7 associated with those sales. In 20x7 Lake also
repossessed P200,000 of jet skis that were sold in 20x5. Those jet skis had a fair
value of P75,000 at the time they were repossessed.
11. In 20x7, Lake would record a loss on repossession of:
12. In 20x4, Lake would recognize realized gross profit of:
13. In 20x6, Lake would recognize realized gross profit of:
14. In its December 31, 20x5, balance sheet, Lake would report:
a.
b.
c.
d.
Deferred gross profit of P800,000.
Deferred gross profit of P650,000.
Installment receivables (net of deferred) ofP700,000.
Installment receivables (net of deferred) of P400,000.
Use the following information for questions 15 to 18:
Houser Appliances accounts for all sales of its merchandise on the installment basis.
Following is the unadjusted trial balance at 12/31/x6
Cash
P 45,000
Installment accounts receivable - 20x4
20,000
Installment accounts receivable - 20x5
50,000
Installment accounts receivable - 20x6
90,000
Inventory
27,400
Repossessed merchandise
4,600
Accounts payable
P 37,600
Deferred gross profit - 20x4
12,000
Deferred gross profit - 20x5
26,400
Common stock
125,000
Retained earnings
10,000
Installment sales
Cost of installment sales
Loss on repossessions
Operating expenses
120,000
78,000
3,000
13,000
P 331,000
____
P 331,000
Additional information:
•
•
•
20x4 gross profit rate: 25%
Total cash receipts during 20x6: P118,000
Merchandise sold in 20x5 was repossessed in 20x6 and the following entry was
prepared:
Deferred Gross Profit—20x5..........................................
2,400
Repossessed Merchandise............................................
4,600
Loss on Repossessions .................................................
3,000
10,000
Installment Accounts Receivable - 20x5……..
15. What is the gross profit rate for 20x5?
16. What is the gross profit rate for 20x6?
17. Of the total cash receipts in 20x6, how much represents collections from
installment sales of:
a. 20x4
b. 20x5
c. 20xx6
18. What is the total realized gross profit in 20x6?
Use the following information for questions 19 to 21:
Homestead Corporation incurred the following activity during its first two years of
operations:
20x4
20x5
Total credit sales
P 750,000
P 900,000
Installment sales*
300,000
450,000
Total cost of sales
500,000
540,000
Installment cost of sales**
165,000
270,000
Cash receipts on installment sales:
20x4 sales
75,000
105,000
20x5 sales
-0120,000
*Included in total credit sales.
**Included in total cost of sales.
Determine the following items for both 20x4 and 20x5:
19. Gross profit realized on installment sales.
20. Total gross profit.
Rubric 20
Grade
Score
1.0
1.4
1.7
1.9
2.1
2.3
2.5
2.7
3.0
3.2
3.4
3.6
20 19 18 17 16 15 14 13 12 11 10 9
3.8
4..0
4.2
4.4
4.5
4.6
8
7
6
5
4
3
4.7
4.8
5.0
2
1
0
Consignment Sales
SAQ # 2
Use the following information for questions 1 and 2:
1. The following summary on the books of KK Company in relation to consignment
transaction from SS, Inc. appears as follows:
Consignment sales, 4 watches at P1,700,000
Consignor’s costs:
Shipment of 10 Rolex “Daytona” watches, P2,000,000
Freight-out, P100,000
Consignee’s charges:
Cartage-in, P75,000
Commission, P340,000
Advertisement, P200,000
Advances received by the consignor amount to P500,000.
1. The amount remitted by KK Co. to SS, Inc. is:
2. The consignment profit is:
3. London Manufacturing Corp. consigned 10 refrigerators to Canada Sales
Company. These refrigerators had a cost of P180,000 each. Freight on the
shipment was paid by London in the amount of P120,000.
Canada Sales Company submitted an account sales stating that it had sold 6
refrigerators and remitted the P1,365,000 balance due London after the following
deductions from the selling price of the refrigerators:
Commission (based on selling price)………………………
Marketing expenses……………………………………………..
Delivery and installation of items sold……………………….
Cartage cost paid upon receipt of consignment…………..
15%
P 90
60
15
The consignor’s net profit from the sale of the consigned goods was:
4. Europe Appliances consigned five electric fans, which cost P800,000 each, to
Germany Marketing Co., which was to sell them for a commission of 15% of
selling price. Any accounts receivable arising from the sale of the consigned
goods were to be the property of Europe Appliances.
Europe paid trucking costs of P200,000. Germany is to be reimbursed P170,000
for local delivery to customers. By December 31, Germany Marketing had sold
three of the fans, two for cash at P1,500,000 each and one on credit at
P1,800,000, of which it had collected 25% as a down payment.
The cash remittance to Europe Appliance and the consignment profit are:
5. The account-sales submitted by Africa Company to Malaysia Company on its
consignment transactions during the month of September follows:
Sales of 7 units of P300,000 each……………
Less: Advance to consignor…………………
Advertising expense………………….
Commission at 10%...............................
Net proceeds remitted………………………..
P2,100,000
P1,000,000
100,000
420,000
1,520,000
P 580,000
The consignment consisted of 10 units which cost Africa P200,000 each, and on
which freight outward of P60,000 was paid.
The consignment profit and the cost of inventory of consigned goods are:
ASAQ # 2
1. P585,000
Sales
Less Charges:
Cartage-in
Commission
Advertisement
Due to Consignor
Less: Advances
Amount remitted
2. P290,000
Sales
Less: Consignor’s charges:
Cost (P2,000,000 x 4/10)
Freight-out (P100,000 x 4/10)
Consignee’s charges:
Cartage-in (P75,0000 x 4/10)
Commission
Advertisement
Consignment profit
P1,700,000
P
75,000
340,000
_200,000
_615,000
P1,085,000
__500,000
P 585,000
P1,700,000
P
800,000
__40,000
P
30,000
340,000
_200,000
840,000
__570,000
P 290,000
3. P213,006
Sales on consignment is first determined by using an algebraic equation as
shown below:
Let X = Sales
.15X = Commission
Equation (from the Account Sales format):
Sales – (Commission + Expenses) = Remittance
X - (.15X
+ P165 ) = P1,365,000
.85X
= P1,365,165
X
= P1,606,076
The consignment profit can now be computed as follows:
Sales
P1,606,076
Cost and expenses:
Cost of goods (6 x P180,000)
P1,080,000
Freight-out (6/10 x P120,000)
72,000
Commission (15% x P1,606,076)
240,911
Marketing expenses
90
Delivery and installation
60
Cartage cost (6/10 x 15)
__
9 _1,393,070
Consignment Profit
P 213,006
4. P2,560,000 is the amount to be remitted as determined from the following
Account Sales:
Sales:
Cash (2 x P1,500,000)
P3,000,000
Credit Sales (1,800,000 x 25%)
__450,000 P3,450,000
Less: Consignee’s charges
Commission (15% x P4,800,000)
P 720,000
Delivery expense
__170,000 __890,000
Remittance
P2,560,000
The consignment profit is P1,390,0000 determined as follows:
Sales:
Cash (2 x P1,500,000)
P3,000,000
Credit Sales (1 x 1,800,000)
_1,800,000 P4,800,000
Cost and expenses:
Cost of goods (3 x P800,000)
P2,400,000
Trucking cost (3/5 x P200,000)
120,000
Commission (15% x P4,800,000)
720,000
Delivery expenses
___170,000 _3,410,000
Consignment profit
P1,390,000
5. P348,000 is computed as follows:
Sales
Cost and expenses:
Cost of goods (7 x P200,000)
Freight-out (7/10 x P60,000)
Advertising
Commission (10% x P2,100,000)
Consignment Profit
P618 is determined as follows:
Cost of goods (3 x P200,000)
Freight –out (3/10 x P600,000)
Cost of inventory on consignment
P2,100,000
P1,400,000
42,000
100,000
__210,000
_1,752,000
P 348,000
P600,000
__18,000
P618,000
Activity 2
1. On May 15, 20x7, Japan Sales Company received a shipment of merchandise
with a selling price of P15,000 from China Company. The consignment
agreement provided for a sale of merchandise on credit with terms of 2/10, n/30.
The commission of 15% was to be based on the accounts receivable collected by
the consignee. Cash discounts taken by customers, expenses applicable to
goods on consignment and any cash advanced to the consignor were deductible
from the remittance by the consignee.
Japan Sales Company advanced P6,000 to China Company upon receipt of the
shipment. Expenses of P80,000 was paid by Japan. By June, 20x7, 70% of the
shipment had been sold, and 80% of the resulting accounts receivable had been
collected, all within the discount period. Remittance of the amount due was made
June 30, 20x7.
The consigned goods cost China Company P10,000 and freight charges of
P120,000 had been paid to ship it to Japan sales Company.
The cash remitted by Japan Sales Company and the cost of inventory on
consignment are:
2. On May 1, the Thailand products Company ships five (5) of its appliances to the
Korea Company on consignment. Each unit is to be sold at P250,000 payable
P50,000 in the month of purchase and P10,000 per month thereafter. The
consignee is to be entitled to 20% of all amounts collected on consignment sales.
Korea Company sells 3 appliances in May and 1 in June. Regular monthly
collections are made by the consignee, and appropriate cash remittances are
made to the consignor at the end of each month. The cost of the appliances
shipped by the consignor was P155,000 per unit. The consignor paid shipping
costs to the consignee totaling P50,000.
The cash remittance to consignor and the consignment profit are:
3. On June 1, Taiwan Sales Co. shipped 25 radio sets to India Store on
consignment, sets to be sold at an advertised price of P200,000. The cost of
each set to the consignor was P100,000. The cost of shipment paid by the
consignor was P75,000. Commission is to be 25% of sales price. During the
month, two sets were returned. On June 30, India Store reported sales of 8 sets
and expenses incurred of P80,000; and remitted the net proceeds due.
The profit on consignment and cost of inventory on consignment are:
4. The account sales submitted by a consignee to Barbie Company for the month of
February, 20x7 is shown below:
Sales of 6 units of P400,000 each………………
Less: Advance to consignor………………………
Advertising expense……………………….
Commission ………………………………...
Net proceeds remitted…………………………..
P2,400,000
P1,000,000
150,000
480,000
1,630,000
P770,000
Barbie Company realized a net income of P426,000 in February out of the
consignment, which consisted of ten (10) units and on which freight out of
P240,000 was paid upon shipment to the consignee.
The cost of goods sold on the consignment amounted to:
5. Anton Corporation delivered 150,000 bath water heaters on consignment basis to
Dave Company. These water heaters cost P900,000 each, and they are
advertised to sell at P1,500,000 each.
The consignee is to be allowed a commission of 15% of the selling price. The
consignment agreement also stated that the consignor would draw a sight draft
on the consigned for 60% of the cost of the water heaters. The advance shall be
recovered periodically by the consignee through monthly deductions, in
proportion to the number of units sold, from the remittances which accompany
the monthly account sales. All expenses of the consignee are to be deducted
monthly as incurred.
The consignee rendered an account sale at the end of the first month showing,
among other things, the following information.
Advertising………………………
Delivery expense……………………………………………………..
Commission……………………………………………………
P 2,250,000
1,125,000
3,375,000
The amount remitted by Dave Co. and the consignment profit of Anton Corp. are:
6.
On January 1, 20x7, Dreicy Electrical Shop received from Kim Trading 300
pieces of bread toasters. Dreicy was to sell these on consignment at 50% above
cost for a 15% commission on the sales price. After selling 200 pieces, Dreicy
had the remaining unsold units repaired for some electrical defects for which
P2,000 was spent. Kim subsequently increased the selling price of the remaining
units to P33,000. On January 31, Dreicy remitted P6,498,000 to Kim after
deducting 15% commission, P85,000 for delivery expenses and P200,000 for the
repair of the defective units.
The consigned goods cost Kim Trading P20,000 per unit, and P900,000 was paid
to ship them to Dreicy Electrical Shop. All expenses in connection with the
consignment are reimbursable to the consignee.
The consignment profit and the cost of inventory on consignment are:
7. Dorothy Trading Corporation consigns merchandise to Cerise, Inc. of Quezon
City. In 20x4 shipments to the consignee amounted to 4,000 and in 20x5 6,210
units. Unit cost and sales price per unit have been uniformly applied at P4 and
P9, respectively.
The consignor considers all shipments as sales and credits the consignee’s
account for remittances made. The consignee remits for the units as soon as they
are sold, and the remittances for 20x5 amounted to P58,590. The inventory on
consignment as of December 31, 20x5 was 1,200 units.
The inventory on consignment as of December 31, 20x4 was:
8. The Mang Cha-a Publishing ships 8-volume sets of encyclopedia to book dealers
on consignment. The sets are to be sold at an advertised price of P99. The cost
per set is P50. Consignees are allowed a commission of 30% of the sales price,
and are to be reimbursed for freight relating to the consigned goods.
On December 3, 20x7, 100 sets were sent to JCo Bookstore on consignment.
The consignor paid packing charges of P170 for the shipment. The shipping cost
paid by the consignor was P400, and the consignee paid P60 for freight on the
sets received. 60 sets were sold in December for cash. Remittance of the amount
owed to the consignor was made on December 31, 20x7.
Both the consignor and the consignee take physical inventories, and they adjust
and close their books at year-end.
How much is the consignor’s net profit on the consignment?
9.
On January 10, 20x7, Karen Mfg. Corporation consigned 10 units of washing
machines costing P3,600 each to Kulin Marketing Corporation. Kulin paid P2,400 for
freight on the shipment.
On January 31, Karen submitted a liquidation report which shoed sales of 6 units
and accompanied by a remittance for P27,300 after a 15% commission on the
sales price and the following deductions:
Cartage paid upon receipt of consigned goods………………
Advertising expense……………………………………………
Delivery and installation of goods sold…………………………
The consignor’s profit from sales of consigned goods is:
P 300
1,800
1,200
10.
Gail, Inc. consigned 10 one-horse power air-condition units to Faye Trading
and paid P2,000 freight-out. The consignee is allowed a commission of 10% on
sales. Faye Trading submitted an account sale on its sales in December, 20x7 as
follows:
Sales, 6 units including 12.5% gross
profit……………………........
Less: Advance to consignor
Selling
expenses…………………………………………...........
Installation and delivery………………………
Commission, 10% of
sales……………………………………...
Net Remittance………………………………………
P72,000
P10,000
800
1,200
7,200
19,200
P52,800
How much is the consignment profit (loss) of Aircon, Inc.?
Rubric 10 points
Grade
1.0
1.4
1.9
2.5
3
3.4
3.8
4.0
4.5
4.8
5.0
10
9
8
7
6
5
4
3
2
1
0
Score