Solutions

CONSIGNMENT

Problem 1:

1. Sales (700 motors * $220) $154,000

Less: Charged by Consignee

Various Expense 2,000

Commission ($154,000 * 10%) 15,400

Freight-in 14,400

Due to Consignor 122,200

Less: Advances to Consignor 50,000

Cash Remittance $72,200

2. Destroyed Motors (100 motors * $150) $15,000

Add: Charged by Consignor
Freight-Out ($10,000 * 100/1000) 1,000
Insurance ($1500 * 100/1000) 150
Abnormal Loss $16,150

3. Inventory on hand (200 motors * $150) $30,000

Add: Charged by Consignor
Freight-Out ($10,000 * 200/1000) 2,000
Insurance ($1,500 * 200/1000) 300

Add: Charged by Consignee

Freight-In ($14,400 * 200/900) 3,200

Cost of Inventory on consignment $35,500

Problem 2:

Prepared by: Sheila Mae M. Araman

1. Sales (10 units sold * $8000 ) $80,000
Less: Charged by Consignee
Freight-In 1,500
Delivery and Installation Expense (10 units sold * $500) 5,000
Commission (($80,000-$6,000) * 10%) 7,400
Sales Allowance 6,000
Doubtful Accounts 25,000
Amount due to Sandy Company $35,100

2. Sales (10 units sold * $8000 ) $80,000

Less: Charged by Consignor
Cost of Goods Sold (10 units sold * $3000) 30,000
Freight-Out ($3,500 * 15/20) 2,625
Less: Charged by Consignee
Freight-In ($1,500 * 15/20) 1,125
Delivery and Installation Expense (10 units sold * $500) 5,000
Commission (($80,000-$6,000) * 10%) 7,400
Sales Allowance 6,000
Doubtful Accounts 25,000
Net Profit $2,850

3. Cost of Inventory on hand (5 units unsold * $3000) $15,000

Add: Charged by Consignor
Freight-Out ($3,500 * 5/20) 875
Add: Charged by Consignee
Freight-In ($1,500 * 5/20) 375

Cost of Inventory on consignment $16,250

AGENCY

Prepared by: Sheila Mae M. Araman

Problem 1:

1. Cost of Goods Sold (P1,500,000 * 90%) 1,350,000

Divide by Cost ratio ÷ 70%
Net Sales P1,928,571.43

Sales P1,928,571.43
Sales Discount 105,000
Net Sales 1,823,571.43
Less: Cost of Goods Sold 1,350,000
Gross Profit 473, 571.43
Less: Various Expense 28,750
Advertising Expense 3,333.33
Depreciation Expense ((P350,000 * 85%) / 8 months) 37,187.5
Freight-Out 7,800
Net Income P396,500.6

2. Journal Entries

Sample Inventory –Agency 20,000

Merchandise Inventory 20,000

Working Fund –Agency 300,000

Cash 300,000

Accounts Receivable 1,928,571.43

Sales - Agency 1,928571.43

Cost of Goods Sold – Agency 1,350,000

Merchandise Inventory 1,350,000

Freight-Out 7,800
Cash 7,800

Cash 420,000
Sales Discount - Agency 105,000
Accounts Receivable 525,000

Machinery -Agency 350,000

Cash 350,000
Machinery -Agency 350,000
Cash 350,000

Depreciation Expense – Agency 37,187.5

Accumulated depreciation – Machinery (Agency) 37,187.5

Prepared by: Sheila Mae M. Araman

 Various Expense -Agency 28,750
Working Fund –Agency 28,750

Advertising Expense 3,333.33

Sample Inventory 3,333.33

Sales –Agency 1,928,571.43

Cost of Goods Sold – Agency 1,350,000
Sales Discount - Agency 105,000
Freight-Out 7,800
Depreciation Expense – Agency 37,187.5
Various Expense –Agency 28,750
Advertising Expense 3,333.33
Income Summary – Agency 396,500.6

Income Summary – Agency 396,500.6

Income Summary 396,500.6

Problem 2:

1. Collections:
w/o discount (380,500 * 80%) 304,400
w/ 4.5% discount ((380,500 * 20%) / 95.5%) 79,685.86

Total Gross Collection 384,085.86

Less: Accounts Receivable 650,000

Remaining Accounts Receivable 265,914.14

Multiply by: % of Doubtful Account * 5%

Agency’s uncollectible amount 13,295.71

2. Sales –Agency 650,000

Less; Sales Discount - Agency 3585.86

Net Sales 646,414.14
Cost of Goods Sold – Agency 552,500
Gross Profit 93,914.14
Depreciation Expense – Agency 1875
Doubtful Accounts – Agency 13,295.71

Prepared by: Sheila Mae M. Araman

 Rent Expense –Agency 25,000
Selling Expense –Agency 15,000
Utilities Expense –Agency 10,500
Advertising Expense 14,600
Net Income –Agency 13,643.43

3. Journal Entries

Sample Inventory –Agency 50,000

Merchandise Inventory 50,000

Working Fund –Agency 250,000

Cash 250,000

Accounts Receivable 650,000

Sales - Agency 650,000

Cost of Goods Sold – Agency 552,500

Merchandise Inventory 552,500

Cash 380,500
Sales Discount - Agency 3585.86
Accounts Receivable 384,085.86

Furniture and Fixtures-Agency 90,000

Cash 90,000

Depreciation Expense – Agency 1875

Accumulated depreciation – Fur&Fix (Agency) 1875

Doubtful Accounts - Agency 13,295.71

Allowance for Doubtful Accounts 13,295.71

Rent Expense -Agency 25,000

Selling Expense –Agency 15,000
Utilities Expense –Agency 10,500
Cash 135,000

Advertising Expense 14,600

Sample Inventory 14,600

Sales –Agency 650,000

Prepared by: Sheila Mae M. Araman

 Cost of Goods Sold – Agency 552,500
Sales Discount - Agency 3585.86
Depreciation Expense – Agency 1875
Doubtful Accounts – Agency 13,295.71
Rent Expense –Agency 25,000
Selling Expense –Agency 15,000
Utilities Expense –Agency 10,500

Advertising Expense 14,600

Income Summary – Agency 13,643.43

Income Summary – Agency 13,643.43

Income Summary 13,643.43

Prepared by: Sheila Mae M. Araman