Problem 2

Fortune Inc. and Trolls Store agreed to a consignment arrangement. Fortune would sell cigarette lighters
on a consignment basis. In return, it would receive a commission of 25% on sales made and will bill
Fortune for all expenses it incurs except 10% of the advertising costs. Furthermore, Trolls Store shall
render an account sales at the end of each year, and shall remit all cash then due. The perpetual
inventory system is used and both parties keep consignment transactions separate from regular sales
transactions.

The following were the transactions relating to consignment.

2019
Nov. 15 Consignor shipped 100 cigarette lighters cost P96 each to be sold at advertised price of P240
each. Packing and freight costs of P1,600 were paid by the consignor.

Dec. 31 The consignee rendered an account sales reporting that there were no sales for the period but
there were payments made for the costs of freight and advertisements amounting to P800 and
P400, respectively.

2020
Jan. to Apr. Consignee sold 90 pieces of cigarette lighters at agreed price.

April 28 Consignor shipped additional 200 pieces of cigarette lighters costing P104 each to be sold at
P248 per lighter. The consignor paid P3,200 for packing and freight.

30 Consignee paid P1,600 for local freight on the above shipment.

May 5 Consignee paid P2,400 advertising cost for the consigned goods.

May to Dec. Consignee sold 100 pieces at the agreed sales prices, which include the remainder of the
goods from the first shipment.

Dec. 31 Consignee prepared account sales after which the required remittance was made.

Required:
1. Prepare the Account Sales.

Year 2019 – no remittance since there were no cigarette lighters sold 

 
Year 2020
Jan-Apr Sales (90 sets x 240) 21,600
May-Dec Sales(10x240) + (90x248) 2,400+ 22,320 24,720
Total sales 46,320
Charges:
Freight (2019&2020)800+1,600 2,400       
Advertisement
(400 x .90) 360+ (2,400x.90) 2,160 2,520   
Commission (46,320x25%)     11,580 16,500
Remittance 29,820