Advanced accounting by baysa lupisan chapter 05

CHAPTER SUGGESTED ANSWERS EXERCISES Exercise – 1 Inventory on Consignment Merchandise Inventory To record transfer of merchandise to consignee 90,000 90,000 Consignee Receivable (P24,000 x 130%) Consignment Sales Revenue To record consignment sales 31,200 Cost of Consignment Goods Sold Inventory on Consignment To record cost of goods sold 24,000 Merchandise Inventory Inventory on Consignment To record return of consigned goods 66,000 Commission Expense (P31,200 x 10%) Cash Consignee Receivable 3,120 28,080 31,200 24,000 66,000 31,200 or Commission Expense Cash Consignment Sales Revenue 3,120 28,080 Cost of Consignment Goods Sold Inventory on Consignment To record cost of goods sold 24,000 Merchandise Inventory Inventory on Consignment To record return of consigned goods 66,000 Exercise – Consignor Books: Inventory on Consignment Finished Goods Inventory Inventory on Consignment Cash Consignee Payable 31,200 24,000 66,000 500,000 500,000 40,000 30,000 10,000 AA1 - Chapter (2008 edition) page Commission Expense (P420,000 x 10%) Consignee Receivable Consignment Sales 42,000 378,000 Cost of Consignment Goods Sold Inventory on Consignment 362,880 420,000 362,880 *Cost of goods sold – P420,000 /1.25 = P336,000 Freight costs – P40,000 / P500,000 = 8% Freight on goods sold – P336,000 x 8% = P26,880 Total costs of goods sold – P336,000 + P26,880 = P362,800 Cash Consignee Payable Consignee Receivable 278,000 10,000 288,000 Consignee Books: Memorandum entry to record receipt of goods on consignment Consignor Receivable Cash 10,000 Cash Consignor Payable 420,000 10,000 420,000 Consignor Payable Commission Revenue 42,000 Consignor Payable Cash Consignor Receivable 288,000 42,000 278,000 10,000 Consignor financial statements: Statement of Financial Position – Assets section Consignee receivable Inventory on consignment P 90,000 177,120 Statement of Recognized Income and Expenses Consignment sales P420,000 Less Cost of consignment sales 362,880 Commission expense Profit from consignment P57,120 42,000 P15,120 Exercise 5-3 Requirement – Consignment profits calculated separately Books of Consignor Consignment –Out Merchandise Shipment on Consignment 7,000 7,000 AA1 - Chapter (2008 edition) page Cash Consignment-Out Consignment-Out 3,500 2,500 Consignment-Out Consignment Income Sales (4 sets @P1,500) CGS (4 sets @P700) Freight-in (4/10 x P1,000) Commission (25% x P6,000) Consignment income 1,300 6,000 1,300 P6,000 ( 2,800) ( 400) ( 1,500) P1,300 Books of Consignee Received 10 sets of electric fan from Ledesma ………… Consignment-In Cash 1,000 Cash Consignment-In 6,000 Consignment-In Consignment Income 1,500 Consignment-In Cash 3,500 1,000 6,000 1,500 3,500 Requirement – Consignment profits not calculated separately Books of Consignor Shipped merchandise to Amoranto, a consignee, ……… Cash Freight Commission Expense Merchandise on Consignment Sales 3,500 400 1,500 600 Merchandise on Consignment Income Summary Unsold merchandise on consignment (6 sets @P700) 4,200 Books of Consignee Received 10 sets of electric fan from Ledesma, a consignor 6,000 4,200 ……………… Ledesma Cash 1,000 Cash Sales 6,000 1,000 6,000 AA1 - Chapter (2008 edition) page Purchases (P6,000 – P1,500 commission) Ledesma 4,500 Ledesma Cash 3,500 4,500 3,500 Exercise – Sales of laser discs, net of commissions and cartage Less: Cost Freight and handling Loss on laser discs consignment P181,800 P180,000 5,400 Sales of TV sets, net of commissions and delivery & installation costs Less: Cost (15 x P9,000) Freight and handling [(15 + 3*)/24** x P10,800] Freight on return of defective units Profit on TV sets on consignments 185,400 P 3,600 P173,250 P135,000 8,100 1,080 144,180 P 29,070 * Number of units returned = Cost of returned units / Cost per unit = P27,000 / P9,000 = ** Units shipped to consignee = Total cost of TV sets shipped / Cost per unit = P216,000 / P9,000 = 24 TV sets P54,000 + (P10,800 6/24 = P2,700) = P56,700 Exercise – Sales (300 x P1,000) + (100** x P1,100) Cost of sales (400 x P600) Gross profit Expenses: Freight (400/500 x P5,500) Safety devices (100/200 x P10,000) Commission (P410,000 x 10%) Delivery cost Consignment profit P410,000* 240,000 P170,000 P 4,400 5,000 41,000 4,500 54,900 P115,100 *Consignee remitt6ance and charges represent only 90% of sales in as much as the 10% commission of the consignee has not yet been included among the charges (P364,500 + P4,500 = P369,000 / 90% = P410,000) ** The 100 units with safety device sold at P1,100 is computed as follows: Sales Sales of units without safety device (300 x P600) Sales of units with safety device Units sold (P110,000 / P1,100) P410,000 300,000 P110,000 100 AA1 - Chapter (2008 edition) page Cost (100 x P600) Freight (100/500 x P5,500) Safety device (100/200 x P10,000) Inventory cost of consigned goods P60,000 1,100 5,000 P66,100 PROBLEMS Problem 5-1 Req Books of consignee; consignment sales merged with regular sales April Received 20 sets of VCD player……………… CCM Corp Cash 1,750 Accounts Receivable Sales 24,000 Purchases CCM Corp 20,000 Cash Accounts Receivable 10,000 CCM Corp Cash May 1,750 24,000 20,000 10,000 5,000 5,000 Accounts Receivable Sales 18,000 Purchases CCM Corp 15,000 Cash Accounts Receivable 15,000 18,000 15,000 15,000 CCM Corp Cash Req – Books of consignor; consignment profits calculated separately 10,000 April Consignment-Out Merchandise Inventory 36,000 Cash Consignment – Out Receivable – Consignee Consignment – Out 5,000 1,750 13,250 Consignment – Out Consignment Income 4,900 10,000 36,000 20,000 4,900 AA1 - Chapter (2008 edition) page Sales (8 sets @P2,500) CGS (8 sets @P1,800) Freight-in (P1,000 x 8/20) Cartage-in (P750 x 8/20) Consignment profit May P 20,000 ( 14,400) ( 400) ( 300) P 4,900 Cash Receivable – Consignee Consignment – Out 10,000 5,000 15,000 Consignment – Out Consignment Income Sales (6 sets @P2,500) CGS (6 sets @P1,800) Freight-in (P1,000 x 6/20) Cartage-in (P750 x 6/20) Consignment profit 3,675 3,675 P15,000 ( 10,800) ( 300) ( 225) P 3,675 Charge and Profit analysis Charges by consignor: Cost of consigned goods Charges by consignee Freight-in Cartage-in Total Sales price Consignment profit April Inventory Sales May Inventory Total Sales P36,000 P14,400 P21,600 P10,800 P10,800 1,000 750 P37,750 400 300 P15,100 20,000 P 4,900 600 450 P22,650 300 225 P11,325 15,000 P 3,675 300 225 P11,325 Problem 5-2 Books of consignor Consignment – Out Merchandise Shipment on Consignment Consignment – Out Cash Cash Consignment – Out Receivable – Consignees Consignment – Out Merchandise Shipment on Consignment Consignment – Out Returned merchandise (4 sets @P1,000) 50,000 50,000 750 750 5,000 10,600 16,400 32,000 4,000 4,000 AA1 - Chapter (2008 edition) page Consignment – Out Consignment Income 5,700 5,700 Total Sales Inventory Charges by consignor: Cost of consigned goods P46,000 P16,000 P30,000 Freight-out 750 300 450 Charges by consignee Cartage-in 1,000 400 600 Delivery and installation 1,600 1,600 Commission 8,000 8,000 Total P57,350 P26,300 P31,050 Sales price 32,000 Consignment profit P 5,700 *Note: Freight and cartage on sets returned are charged against sales of the period Books of consignee Received 50 cordless phones………… Accounts Receivable Consignment – In 32,000 Cash Accounts Receivable P32,000 – P16,400 (collectible) = P15,600 15,600 32,000 15,600 Returned four (4) defective cordless phones…………… Consignment – In Delivery and Installation Expense Commission on Consignment Cash Remittance 15,600 1,600 8,000 5,000 Problem 5-3 Correcting entry to bring accounts with Alejo up to date Consignment Commissions Freight on Consignment Shipments (P2,600 x 65/100) Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100) Consignment Sales Alejo Account sales – Alejo Sales (65 stoves @ P3,600) Commission (25% of P234,000) Freight Amount owed Total amount remitted P234,000 ( 58,500) ( 2,600) P172,900 ( 187,900) 58,500 1,690 910 6,000 67,100 AA1 - Chapter (2008 edition) page Balance-charge against Sunstar P 15,000 Entry that should have been made for transactions of Alejo on the books of consignor: Cash Consignment Commission Freight on Consignment Shipments Prepaid Expenses on Consigned Merchandise Consignment Sales Alejo 187,900 58,500 1,690 910 234,000 15,000 Net effect of entries already made with Alejo for transfer of merchandise and remittance Cash Alejo Consignment Sales 187,900 52,100 240,000 Correcting entry to bring accounts with Burgos up to date Consignment Commissions Freight on Consignment Shipments (P2,600 x 65/100) Prepaid Expenses on Consigned Merchandise (P2,600 x 35/100) Consignment Sales Burgos Account sales – Burgos Sales (15 stoves @ P3,600) Commission (25% of P54,000) Freight Amount owed Total amount remitted Balance-amount owed Sunstar 13,500 750 1,250 42,000 57,500 P54,000 ( 13,500) ( 2,000) P38,500 ( 11,500) P27,000 Entry that should have been made for transactions of Burgos on the books of consignor: Cash Consignment Commission Freight on Consignment Shipments Prepaid Expenses on Consigned Merchandise Burgos Consignment Sales 11,500 13,500 750 1,250 27,000 54,000 Net effect of entries already made with Burgos for transfer of merchandise and remittance Cash Burgos Consignment Sales Problem 5-4 Entries to bring account with Domingo up to date 11,500 84,500 96,000 AA1 - Chapter (2008 edition) Cash Operating Expenses Receivables-Consignees Remittance for 10 sets less charges 5,100 900 Sales Receivables – Consignees Unsold units previously recognized as sales 3,000 Merchandise in Transit Cost of Goods Sold Merchandise returned and still in transit 1,600 Entries to bring account with Estrella up to date Cash Merchandise on Consignment Operating Expenses Receivables – Consignees 3,000 1,600 13,400 600 1,000 15,000 9,000 Merchandise on Consignment Cost of Goods Sold Unsold units in the hands of consignee 4,800 Merchandise on Consignment Operating Expenses Expenditures related to unsold consigned goods charged to expense 1,700 9,000 4,800 1,700 960 600 360 Sales Receivables – Consignees 2,400 Merchandise in Transit Receivables – Consignees 1,280 Closing Entries Sales Cost of Goods Sold Operating Expenses Income Summary 6,000 Sales Receivables – Consignees Entries to bring account with Fajardo up to date Operating Expenses Receivables – Consignees Accounts Payable page Income Tax 2,400 1,280 715,600 420,100 89,160 206,340 72,219 AA1 - Chapter (2008 edition) page 10 Income Tax Payable 72,219 Income Summary Income Tax 72,219 72,219 Income Summary Retained Earnings 134,121 134,121 Moonstar Company Statement of Financial Position December 31, 2008 Current assets: Cash Receivables – Consignees Inventories: On hand In transit On consignment Total Current Assets Plant and Equipment Total Assets P134,000 62,720 P112,000 2,880 7,100 Current Liabilities: Accounts Payable Income Tax Payable Ordinary Share Capital, P100 par Retained Earnings Balance, beginning Net income for 2008 Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity 121,980 318,700 170,000 P488,700 P25,360 72,219 P200,000 P 57,000 134,121 191,121 391,121 P488,700 MULTIPLE CHOICE A C A A A Receipts (215 x P500) Less Shipping charges Remittance P107,500 2,100 P105,400 B (215 x 40% x P580) + (215 x 60% x P640) – (215 x P500) = P24,860 D Receipts ( dozens x 12 x P2,000) Charges: Expenses Commissions (15% x P168,000) P168,000 P180,000 + P9,000 = P189,000 P 3,000 25,200 28,200 AA1 - Chapter (2008 edition) 10 C C B page 11 Remittance P139,800 Sales x 12 x P2,000 Cost of Sales x 12 x P1,000 Freight x P30 Expenses Commission P168,000 x 15% P168,000 Sales ( x P7,000) Charges: Commission (20% x P28,000) Freight Remittance P84,000 210 3,000 25,200 112,410 P 55,590 P28,000 P5,600 1,600 7,200 P20,800 11 D Cost (6 x P4,000) Freight (P1,600 x 6/10) Balance of Merchandise on Consignment account P24,000 960 P24,960 12 D Sales Cost (4 x P4,000) Gross profit Less: Commission Freight (P1,600 x 4/10) Net profit on consignment P28,000 16,000 P12,000 13 B Remittance Charges: Delivery expense Repairs Total Sales Cost of sales Gross profit Expenses: Commission (P79,800 x 15%) Repairs (P2,000 x 60/100) Delivery Shipping cost (P900 x 260/300) Consignment profit *Sales Less Sales of units with defects (200 x P300) Sales of repaired units Selling price of repaired units Number of repaired units that were sold Units sold without repairs Total number of units sold Unit cost Cost of sales P5,600 640 6,240 P 5,760 P64,980 P 850 2,000 P11,970 1,200 850 780 P79,800 60,000 P19,800 ÷ P330 60 240 300 x P200 P52,000 2,850 P67,380 ÷ 85% P79,800 52,000* P27,800 14,800 P13,000 AA1 - Chapter (2008 edition) page 12 14 B Cost (40 x P200) Repairs (P2,000 x 40/100) Shipping cost (P900 x 40/300) Value of inventory on consignment P 8,000 800 120 P 8,920 15 D Remittance Charges: Cartage Advertising Delivery and installation Total P54,600 P 600 3,600 2,400 Sales 16 17 C D Sales Cost and expenses: Cost (6 x P7,200) Freight (P4,800 x 6/10) Cartage (P600 x 6/10) Advertising Delivery and installation Commission (15% x P72,000) Consignment income P72,000 P43,200 2,880 360 3,600 2,400 10,800 Remittance Consignee charges, excluding the 15% commission (P4,500 + P3,000 + P750) Sum of remittances and charges A Sales Cost of sales (6 x P9000) Gross profit Expenses: Commission (P90,000 x 15%) Freight-out (P6,000 x 6/10) Marketing expense Delivery and installation Cartage (P750 x 6/10) Net profit from the sale of consigned goods 19 D P90,000 x 15% = P13,500 20 A Sales collected [(2 x P1,500) + (1 x P1,800 x 25%)] Commission (P3,450 x 15%) Remittance 63,240 P 8,760 P68,250 8,250 P76,500 ÷ 85% P90,000 Sales price of refrigerators 18 6,600 P61,200 ÷ 85% P72,000 P90,000 54,000 P36,000 P13,500 3,600 4,500 3,000 450 25,050 P10,950 P3,450 720 P2,730 AA1 - Chapter (2008 edition) 21 22 C B Sales Cost of sales ( x P800) Gross profit Expenses: Trucking (P200 x 3/5) Delivery Commission Profit resulting from consignment Sales Cost (7 x P2,000) Gross profit Expenses: Advertising Commission Freight (P600 x 7/10) Net income on the consignment 23 C ( x P2,000) + (P600 x 3/10) = P6,180 24 D Remittance Charges by consignor Cost (P3,840 x 30/48) Freight and handling (P1,000 x 30/48) Freight and handling charged by consignee Net income 25 C 26 27 T-shirts: Cost (P3,840 x 18/48) Freight and handling (P1,000 x 18/48) Baby dresses: Cost (P2,400 x 4/24) Freight and handling (P540 x 4/24) Cost of the inventory in the hands of consignee Sales Cost of sales (P90,000 x 7/10) Gross profit Expenses: Freight (P3,000 x 7/10) Commission Cartage-in (P1,050 x 7/10) Profit on consignment of TV sets C TV sets (P94,050 x 3/10) DVD sets (P84,450 x 2/5) Cost of inventory in the hands of consignee page 13 P4,800 2,400 P2,400 P120 170 720 _ P1,390 P21,000 14,000 P 7,000 P1,000 4,200 420 5,620 P 1,380 P3,750 P2,400 625 75 P1,440 375 P 400 90 3,100 P 650 P1,815 490 P2,305 P84,000 63,000 P21,000 P2,100 8,400 735 11,235 P 9,765 P28,215 33,780 P61,995 AA1 - Chapter (2008 edition) page 14 28 A P3,375 / 15% = P22,500 / P1,500 15 units 29 C Sales (15 x P1,500) Less: Advertising Delivery expense Commission Advances (150 x P900 x 60% x 15/150) Remittance P22,500 P2,250 1,125 3,375 8,100 Sales Less Cost (15 x P900) Expenses (P2,250 + P1,125 + P3,375) Consignment profit P13,500 6,750 Sales Less: Cost (P8,400 x 9/12) Freight-out (P720 x 9/12) Delivery Commission Advertising Net income P6,300 540 450 2,160 500 30 31 A D 32 B P10,800 – P450 – P2,160 – P500 = P7,690 33 B P9,120 x 3/12 = P2,280 34 C Net income Expenses: Freight (P240 x 6/10) Advertising Commission Gross profit Less Sales Cost of goods sold 35 B Cost per unit (P1,200 / units) Unsold units Total cost of unsold units Inventoriable cost – freight (P240 x 4/10) Total cost 36 A Remittance Charges: Advertising Delivery Total proceeds from sales, net of 20% commission 37 C 14,850 P 7,650 P22,500 20,250 P 2,250 P10,800 P 3,650 850 P 426 P 144 150 480 774 P1,200 2,400 P1,200 P200 x P800 96 P896 P3,165 P120 75 Total sales price of the handbags 195 P3,360 ÷ 80% P4,200 Cost (3 x P300) Freight (3/10 x P150) P 900 45 AA1 - Chapter (2008 edition) 38 39 40 B B D page 15 Advertising ( 3/10 x P120) Inventory of unsold handbags 36 P 981 Sales Cost of sales (7 x P300) Gross profit Expenses: Freight ( 7/10 x P150) Commission (4,200 x 20%) Advertising ( P120 x 7/10) Delivery Net income on the consignment P4,200 2,100 P2,100 Sales (80 x P1,500) Charges: Cost of returning defective units Transportation Insurance Commissions (P120,000 x 20%) Reconditioning cost Balance Advances (80 + 10) x P300 Remittance Sales Cost of sales (80 x P500) Gross profit Expenses: Transportation (90/120 x P1,500) Insurance Cost of returning defective units Transportation of consignee (90/120 x P350) Insurance – consignee (90/120 x P200) Insurance loss (P500 x 10% x 10) Commission Reconditioning cost Profit on consignment P 105 840 84 75 1,104 P 996 P120,000 P 100 350 200 24,000 150 24,800 P 95,200 27,000 P 68,200 P120,000 40,000 P 80,000 P 1,125 900 100 265 150 500 24,000 150 27,190 P 52,810 ... P15,000 ( 10,800) ( 300) ( 225) P 3,675 Charge and Profit analysis Charges by consignor: Cost of consigned goods Charges by consignee Freight-in Cartage-in Total Sales price Consignment profit April... 5,000 10,600 16,400 32,000 4,000 4,000 AA1 - Chapter (2008 edition) page Consignment – Out Consignment Income 5,700 5,700 Total Sales Inventory Charges by consignor: Cost of consigned goods P46,000... P30,000 Freight-out 750 300 450 Charges by consignee Cartage-in 1,000 400 600 Delivery and installation 1,600 1,600 Commission 8,000 8,000 Total P57,350 P26,300 P31 ,050 Sales price 32,000 Consignment