CPA REVIEW SCHOOL OF THE PHILIPPINES

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ADVANCED FINANCIAL ACCOUNTING GERMAN/VALIX/K. DELA CRUZ/MARASIGAN

CONSIGNMENT SALES

Part I: Theory of Accounts

1. Goods out on consignment are part of the inventory balance of _____.

A. The consignor
B. The consignee
C. The customer
D. The supplier

2. Which of the following statements is true about consignment sales?

A. Both the consignor and consignee recognize sales revenue after the goods have been sold to
third party customers
B. Sales revenue are recognized at the point in time when the consignor transfers the goods to the
consignee
C. Inventory risks still rests with the consignor even after transfer of goods to the consignee
D. The consignor receives a commission from the consignment sales

3. Which party is exposed to credit risk?

A. The consignee
B. The consignor
C. Both a and b
D. Neither a nor b

4. This document shows all the sales transaction made by the consignee on behalf of the consignor
with all commissions and other charges included.
A. Sales order
B. Sales invoice
C. Account sales
D. Accounts receivable

Part II: Problem Solving

1. Ji Pyeong shipped 100 units of its inventories to Do San on consignment. Each unit costs P450 and
has a standard retail price of P750. The 100 units had a freight-in charge of P3,750. After a month,
Do San returned 10 units of inventory and remitted P32,850 cash to Ji Pyeong together with an
account sales with the following items included:
 Commission of 20%
 Cartage on consigned goods, P750
 Marketing and promotional expenses, P1,500
 Delivery to customer and installation, P900

1. How many units were sold by Do San?

A. 0 units
B. 40 units
C. 60 units
D. 100 units

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2. How much is the cost of inventory still out on consignment at the end of the month?
A. 9,900
B. 14,850
C. 15,300
D. 0

3. How much is the total consignment profit or (loss) recognized by Ji Pyeong?

A. (3,825)
B. (3,450)
C. 3,450
D. 3,720

2. Hua Ze Lei consigned 10,000 products to Dao Ming Si costing P72 each and can be sold for P120.
The consignment agreement provides that Dao Ming Si is entitled to a 15% commission on the
sales, but is required make an advance equivalent to 60% of the cost of the goods. The advance
made is to be recovered through reduction from the monthly remittance, the amount of which is
proportionate to the number of goods sold. At the end of the month, the account sales showed the
following information:
 Commission charges, P27,000
 Freight-out, P18,000
 Advertising costs, P9,000

1. How much was the total remittance made by Dao Ming Si for the month?
A. 61,200
B. 64,800
C. 126,000
D. 180,000

2. How much is the total consignment profit or (loss) recognized by Hua Ze Lei?
A. (18,000)
B. 18,000
C. 25,000
D. 41,000

END

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