CHAPTER 9 Consignment Sales
1. Which of the following indicates that an entity is acting as an agent
rather than principal?
a. The entity is primarily responsible in fulfilling the contract.
b. The entity has the discretion in establishing the price at which the
good or service is sold to a customer.
c. The entity bears the loss if the customer fails to pay the sale price.
d. The entity does not have inventory risk.
2. When should a consignor recognize revenue from a consignment sale?
a. When the consignor sells the goods to the consignee
b. When the consignee sells the goods to the end customer
c. At the point of time indicated in the contractual arrangement
between the consignor and the consignee
d. Any of these
3. How should each of the following recognize revenue from the sale of
consigned goods to end customers?
Consignor Consignee
a. Gross amount of sale Commission or fee
price
b. Sale price net of Commission or fee
commission
c. Net amount of sale price Mark up
d. Fee Commission
4.
Consignor Co. paid the in-transit insurance premium for consignment
goods shipped to Consignee Co. In addition, Consignor advanced part
of the commission that will be due when Consignee sells the goods.
Should Consignor include the in-transit insurance premium and the
advanced commissions in inventory costs?
Insurance Advanced commission
premium
a. Yes Yes
b. No No
c. Yes No
d. No Yes (AICPA)
5. Entity A consigns goods to Entity B. Normally, end customers buy over-
the-counter from Entity B. However, in some cases, Entity B ships the
goods to the customer. Entity B deducts the shipping cost from the
amount remitted to Entity A. How should Entity A account for the
shipping cost?
a. Freight in c. Commission expense
b. Receivable d. Freight out
COMPUTATIONAL
1. Yahama Co. consigns bass guitars costing P500,000 to a consignee.
Yahama incurs P20,000 freight in transporting the goods to the
consignee's place and P5,000 repair costs for minor damages during
shipment. To induce the consignee in signing the consignment
contract, Yahama pays the consignee an advanced commission of
P100,000 to be deducted from the consignee's actual commission on
future sales. How much is the cost of the consigned goods in Yahama's
and the consignee's books?
Yahama Consignee
a. 520,000 0
b. 525,000 0
c. 520,000 100,000
d. 625,000 0
2. Falling Leaves Co.
consigned 50 units of a certain product to a consignee on August 1,
20x1. The products originally cost P10,000 apiece and are marked to
sell for P25,000 each. Falling Leaves Co. incurred P25,000 in shipping
the products to the consignee. At month-end, the consignee remitted
P960,000, net of the agreed commission of 20%. Falling Leaves Co.
would report which of the following?
Revenue Profit
a. 1,200,000 696,000
b. 1,200,000 456,000
c. 960,000 504,000
d. 960,000 480,000
3. The following
items were included in Opal Co.'s inventory account at December 31,
20x1:
Merchandise out on consignment, at sales 40,000
price, including 40% markup on selling price
Goods purchased, in transit, shipped FOB 36,000
shipping point
Goods held on consignment by Opal 27,000
By what amount should Opal's inventory account at December 31,
20x1 be reduced?
a. 103,000 b. 67,000 c. 51,000 d. 43,000
(AICPA)
Use the following information for the next two questions:
ABC Co. consigned twelve refrigerators to XYZ, Inc. The refrigerators
originally cost P6,000 each. ABC paid freight of P720 on the transfer.
The consignee subsequently reported sale of five units, each sold for
P7,700, and deducted the following from the selling price:
Commission (based on sales net of 10%
commission)
Marketing expense (based on commission) 10%
4. Delivery and installation (on each unit sold) P30 How
much was ABC's profit on the five refrigerators sold?
a. 3,815 b. 37,780 c. 4,200 d. 3,395
(RPCPA)
5. How much was the consignee's net remittance for the sale?
a. 34,500 b. 33,780 c. 4,500 d. 4,200
(RPCPA)
