Chapter 10

Problem I
1. The journal entries shown below would be made on the consignor’s and consignee’s books (assume the use of
perpetual inventory):

Entries on Consignor’s Books Entries on Consignee’s Books

Transactions (Herbalife Supplier) (Conrado Enterprises)
Shipment of goods on Inventory on No entry
consignment. Consigment…… 60,000 (memorandum entry
Finished Goods only)
Inventory*.... 60,000

2. Payment of expenses Inventory on No entry

by consignor. Consignment….. 600
Cash…….. 600

3. Payment of expenses Inventory on Consignor

by consignee. Consignment…… 2,400 Receivable 2,400
Consignee Cash……………. 2,400
Payable……… 2,400
Advances by Cash……… 3,360 Advances to
Consignor Advances from Consignor 3,360
Consignee….. 3,360 Cash 3,360
Sale of merchandise No entry. Cash 48,000
Consignor payable 48,000
6. Notification of sale to
consignor and
payment of cash due. Commission expense 4,800 Consignor Payable.. 48,000
Commission: Advances from Commission
10% x P48,000 = Consignee…… 3,360 Revenue…….. 4,800
P4,800 Cash……. 37,440 Consignor
Consignee Payable 2,400 Receivable ….. 2,400
Consignment Cash……… 37,440
Sales Revenue.. 48,000 Advances from
Consignee…… 3,360

7. To record cost of
goods sold and Cost of goods sold** 31,500
related costs. Inventory on
** (P60,000 + P600 + Consignment 31,500
P2,400) x ½ =
P31,500
*if periodic method is used, the credit should be “consignment shipments” account treated as reduction in the Costs
of goods available for sale to arrive at Cost of Goods Sold Available for Regular Sale.

2. The remittance amounting to P37,440 can be determined by preparing the Account Sales as follows:

Sold for the Account of:

Jingka Juice
Sales (60 sachets of herbal goods) P48,000
Charges:
Finishing costs…………………….. P 2,400
Commission (P48,000 x 10%)……………….. 4,800 7200
Due to Consignor……………………………. P40,800
Less: Advances………………. 3,360
Balance………………………… P37,440
Remittance Enclosed……………… 37,440
Balance Due…………… P 0
Items on Hand (50 sachets of herbal goods): P60,000 x 50% P30,000

Problem II
1. The account sales:
Sold for the Account of:
AA Company
Sales (8 sets @ P24,000)……………… P 192,000
Charges:
Freight-in…………… P 6,000
Advertising expense………… 2,400
Deliveries and installation expenses 9,600
Repairs expense – on units sold.. 4,800
 Commissions, 25% of sales 48,000 70,800
Due to Consignor……………………………. P121,200
Less: Advances………………. 0
Balance………………………… P121,200
Remittance Enclosed……………… 30,000
Balance Due…………… P 91,200
Items on Hand………… 15 sets
Items Returned (defective)….……. 2 sets

2. The inventory on consignment amounted to P189,000 computed as:

Charge Analysis
Sales Inventory Total
(8 sets) (15 sets) (25 sets)
Charges by consignor:
Cost of consigned goods
(@P12,000/set) P 96,000 P180,000 P 300,000
Freight-out (P9,000/25 sets = P360 per set) 3,600* 5,400 9,000
Charges by consignee:
Freight-in (P6,000/25 sets =P240 per set) 2,400* 3,600 6,000
Advertising expense………….. 2,400 0 2,400
Delivery and installation 9,600 0 9,600
Repairs expense…………… 4,800 0 4,800
Commissions [25% of sales (8 sets x
P24,000 per set] 48,000 0 ___48,000
Total P166,800 P189,000 P379,800
* Freight on sets returned is charged against sales of the period.
** Normally, the term “freight-out” is synonymous to “delivery expense” which is classified as selling
expenses if we are dealing with a third party. But, for consignment accounting where the transfer of
merchandise if from consignor to consignee, the usage of the term “freight-out” does not construed to be a
selling expense but still an inventoriable cost (which is part of freight-in).

The consignment net income amounted to P25,200 computed as:

Consignment Sales (8 sets x P24,000 per set) P 192,000
Less: Costs and expenses:
Charges by Consignor:
Cost of consigned goods @P12,000/set) P 96,000
Freight-out (P9,000/25 sets = P360 per set) 3,600* 99,600
Charges by consignee:
Freight-in (P6,000/25 sets =P240 per set) P 2,400*
Advertising expense………….. 2,400
Delivery and installation 9,600
Repairs expense…………… 4,800
Commissions [25% of sales (8 sets x P24,000 per set] 48,000 67,200
Net Income P 25,200

Problem III
Summit Electronics Company
  Inventory on Consignment (800 @ P570) 456,000
     Finished Goods Inventory 456,000

  Consignment Expense (P368,000 x 30%) 110,400

  Accounts Receivable--Consignee Sales 257,600
     Sales Revenue—Consignment (P920 x 400) 368,000

  Cost of Consigned Goods Sold (P570 x 400) 228,000

     Inventory on Consignment 228,000

  Cash [(P920 x 70%) x 380] 244,720

     Accounts Receivable--Consignee Sales 244,720

Farley Hardware
No entry upon receipt of consigned merchandise.

Cash (P920 x 400) 368,000

     Consignor Payable 257,600
      Commission Revenue 110,400

  Consignor Payable 244,720

     Cash 244,720

49. Seahawks, Inc. had the following consignment transactions during December:

Inventory shipped on consignment to Ashe Company P18,000

Freight paid by Seahawks 900
Inventory received on consignment from Fenn Company 12,000
Freight paid by Fenn 500

Multiple Choice Problem

1. c – P1,200

Commission = 25% x Sales price

P400 = 25% x Sales price
Sales price = P400 ÷ 25% = P1,600

Number of units sold = Selling price = __P1,600__ = 8 tapes

Price per tape P200 per tape

Sales ……………………………………………………………….. P1,600

Less Commission of consignee………………………………... 400
Amount remitted by Beta View Store………………………...P1,200

2. a – P 370

Charges Related to
Total Consignment Inventory on
Charges Sales Consignment
(25) (8) (15)
Consignor’s charges:
Cost P2,500 P800 P1,500
Freight-out 75 30 45
Consignee’s charge - Commission __400__ __400__ _______
Total P2,975 1,230 _P1,545_
Sales price _1,600_
Consignment profit _P370_

3. a – P1,545 (refer to No. 2 for computation)

4. b
Sales (P2,250 / 15%) P15,000
Divided by: Selling price per unit P 1,000
Number of units sold 15 units

5. c
Sales P15,000
Less Charges:
Commission P 2,250
Advertising 1,500
Delivery expense ___750 __4,500
Due to Consignor P10,500
Less: Advances
Value of note – sight draft: (100 beds x P600 per bed) x 60% P36,000
Multiplied by: Proportional number of beds sold 15/100 __5,400
Amount remitted P 5,100

6. d – P1,500
Sales P15,000
Less Charges:
 Consignor’s charge:
Cost of beds (P600 per bed x 15 beds) 9,000
Consignee’s charges:
Commission P2,250
Advertising 1,500
Delivery expense ___750 __4,500
Consignment net income P1,500

7. a – no items were sold in November;

Sales (unknown) P x
Less Charges:
Commission 15% x
Remittance P 27,200

x – 15%x = P27,200
85%x = P27,200
x = P32,000

8. c – P16,800
Sales (unknown) x
Less Charges:
Advertising P500
Delivery and installation charges 100
Commission (unknown) 20%x _______
Remittance P 12,840

x – (P500 + P100 + 20%x) = P 12,840

x – 20%x = P12,840 + P600
80%x = P13,440
x = P16,800

9. b- P6,080
Cost (P150 per unit x 40 units) P6,000
Freight on shipment (P200 x 40/100) 80
Cost of inventory on consignment P6,080

10. c - 6
Sales (unknown) x
Less Charges:
Commission (unknown) 20%x
Advertising P1,000
Delivery and installation 600
Cartage on consigned goods 500
Remittance P21,900

x – (20%x + P1,000 + P600 + P500) = P21,900

x – 20%x = P21,900 + P2,100
80%x = P24,000
x = P30,000

Number of units sold = _P30,000_ =6

P5,000 per set

11. b – P2,300
Charges Related to
Total Consignment Inventory on
Charges Sales Consignment
(10) (6) (3)
Consignor’s charges:
Cost P30,000 P18,000 P9,000
Freight-out 2,500 1,750 750
Consignee’s charges:
Commission (20% x P30,000) 6,000 6,000
Advertising 1,000 1,000
Delivery and installation 600 600
Cartage __500__ __350__ __150__
 Total P40,600 27,700 _P9,900_
Sales price _30,000_
Profit on Consignment __P2,300__

12. d – None of the above (P9,900) – refer to No. 11 for computation.

13. No answer available - P17,625

Sales – (Sales x 20%) – P600 – P390 – P210 = P12,900
.8 Sales = P14,100
Sales = P17,625.

14. a (P270 x 50) + [(P600 ÷ 80) x 50] = P13,875.

AA Sales - Nos. 15 to 17:

15. a
Gross collection (P15,000 x 70% x 80%) P 8,400
Less: Cash discount taken by customer (P8,400 x 2%) __168
Net collection P 8,232
Less Charges:
Expenses P 800
Commission (P8,400 x 15%) _1,260 __2,060
Due to Consignor P 6,172
Less: Advances _6,000
Amount remitted P 172

16. b
Charges Related to
Total Consignment Inventory on
Charges Sales Consignment
(100%) (70%) (30%)
Consignor’s charges:
Cost P10,000 P 7,000 P 3,000
Freight 120 84 36
Consignee’s charges:
Expenses 800 800
Commission (15% x P10,500) 1,575 1,575
Cash discount (P10,500 x 80% x 2%) 168 168
Total P12,663 P 9,627 _P9,900_
Sales price (70% x P15,000) _10,500_
Profit on Consignment P 873

17. b – refer to No. 16 for computation

RR Products Company – Nos. 16 to 18

16. c
Collection made pertaining to:
May sale
Down payment (3 x P50) P 150
Monthly payment thereafter (3 x P10) 30 P 180
June sale
Down payment (1 x P50) ___50
Total P 230
Less: Commission (P230 x 20%) ___46
Amount remitted P 184

17. d – P140
Charges Related to
Total Consignment Inventory on
Charges Sales Consignment
(5) (4) (1
Consignor’s charges:
Cost P 775 P 620 P 155
Freight 50 40 10
Consignee’s charges:
Commission 200 200 ____
Total P1,025 P 860 P165
 Sales price (4 units x P250/unit) _ 1,000
Profit on Consignment P 140

18. b – refer to No. 17 for computation

19. b
Collection made:
Cash sale (P1,500 x 2) P 3,000
Credit sale (P1,800 x 25%) ___450
Total P3,450
Less: Charges
Freight P 320
Commission [(P3,000 + P1,800) x 15%] __720 __1,040
Amount remitted P 2,410

20. a
Charges Related to
Total Consignment Inventory on
Charges Sales Consignment
(5) (3) (2)
Consignor’s charges:
Cost P4,000 P 2,400 P 1,600
Freight 200 120 80
Consignee’s charges:
Freight 320 192 128
Commission 720 720 ______
Total P5,240 P 3,432 P1,808
Sales price 4,800
Profit on Consignment P 1,368

21. b – P1,808 – refer to No. 20 for computation

22. d – 244,600
Sales on credit (14,000 per unit x 12 units) + (13,000 x 10) P298,000
Less: Sales allowance granted P 2,000
Bad debts 7,000
Commission [2% x (P298,000 – P2,000)] _44,400 __53,400
Amount still due from BB, Inc P 244,600

23. d – P67,280
Charges Related to
Total Consignment Inventory on
Charges Sales Consignment
(30) (22) (8)
Consignor’s charges:
Cost P240,000 P176,000 P64,000
Freight-out 1,800 1,320 480
Consignee’s charges:
Sales allowance 2,000 2,000
Bad debts 7,000 7,000
Commission
[15% x (P298,000 – P2,000)] 44,400 44,400
Total P295,200 P230,720 _P64,480_
Sales price [P14,000 per unit x 12 units)
+ (P13,000 per unit x 10 units)] 298,000
Consignment profit P 67,280

24. d – refer to No. 23 for computation

25. b – 395
Sales (unknown) x
Less Charges:
Commission (unknown)
( )
__x__ P10
P100
 Delivery expense __P45__ ________
Remittance P35,505

x- [( _x__ ) P10 + P45 ] = P35,505

100

x – _P10x_ = P35,550
P100
P100x – P10x = P3,555,000
P90x = P3,555,000
x = P39,500

Number of ballpens sold = _P39,500_ = P395

P100 per unit

26. b (83 dayag)

Consignment
Regular Sales Sales Total
Sales P120,000 P30,000 P150,000
Cost of sales 84,000 19,500* 103,500
Gross profit P 36,000 P10,500 P 46,500
Operating expenses:
Commission (P30,000 x 5%) P 1,500 P 1,500
Freight-in (P260 x P19,500*/P26,000) 1,950 1,950
Others
Regular (P15,150 x P19,500/P26,000) 12,120
Consignment
(P15,150 x P30,000/P150,000) _______ 3,030 3,030
Total P 12,120 P 4,725 _P16,845_
Net profit P 23,880 P 5,775 P29,655
*P26,000 – P6,500 = P19,500

27. d – P5,775 (refer to No. 26 for computation)

28. a – (P18,000 + P900) = P18,900 (85 dayag)

Theories
1. d
2. d
3. a
4. c