Consignment Arrangements

Activity No. 7

Problem 1
Use the following information for the next two questions:
On November 1, 2022, Britney Company shipped five of its appliances to the Jenifer Company on
consignment. Each unit is to be sold at P100,000 payable P20,000 in the month of purchase, and P4,000
per month thereafter. The consignee is to be entitled to 20% of all amounts collected on consignment
sales. Jenifer Company sells three appliances in November and one in December. 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 P62,000 per unit. The
consignor paid shipping costs to the consignee totaling P20,000.

Required:
1. How much is the cost of inventory on consignment on December 31, 2022?
2. How much is the profit on consignment for 2022?
3. How much is the total amount remitted to the consignor for the year 2022?

Problem 2
On July 15, 2022, James Company received a shipment of merchandise with a selling price of P300,000
from Reid Company . The consigned goods costs Reid Company P200,000 and freight charges of P2,400
had been paid to ship the goods to James Company.

The consignment agreement provided for a sale of merchandise on credit with terms of 2/10, n/30. The
15% commission is to be based on the accounts receivable collected by the consignee. Cash discounts
taken by the customers, expenses applicable to goods on consignment and any cash advanced to the
consignor are deductible from remittance by the consignee.

James Company advanced P120,000 to Reid Company upon receipt of the shipment. Expenses of
P16,000 was paid by James Company. By August 2022, 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 was made on August 30, 2022.

Required:
1. How much is the cash remitted by James Company?
2. How much is the net income on consignment?
3. How much is the cost of the unsold units in the bonds (merchandise on consignment) of James
Company?

Problem 3
Stainless Works Mfg. Co. Consigned five dozens of stainless chairs to Urban furniture Company on April 1,
2023. Each chair cost P120 and the consignor paid P600 for the shipment to the consignee. On August
15, 2022, 36 chairs were already sold and the consignee rendered an account sales , and remitted the
balance due the consignor in the amount of P5,580 after deducting the following:

Commission at 15% of the selling price

Selling expenses P360
Installation and delivery 180

Required:
1. How much is the profit on consignment?
2. How much is the cost of the inventory on consignment in the hands of Urban Furniture Company?