Sid Breman Art Gallery operates a retail store in Florida. All art displayed in the gallery is available for purchase. Much of the art is owned by the gallery. However, there are also works on display that belong to other artists. When the consigned art is sold, Sid remits 75% of the proceeds to the creator and retains a 25% commission. Art belonging to the gallery is marked to sell at 200% of cost.

Following is a complete list of art on display in the gallery, along with the retail selling price.

(a) Identify if Sid Breman Art Gallery is the consignor or the consignee. Should the consigned inventory be reported on the balance sheet of the gallery? What special accounting/control challenges are presented by the existence of consigned inventory?

(b) Determine the correct inventory valuation to be reported by the gallery.

(c) Prepare a compound journal entry to reflect the sale of a consigned art item for $1,000 cash. Assume Sid reports only the commission as a revenue, and reflects the amount due to the artist as a payable.

Transcribed Image Text:

NAME SELLING PRICE OWNERSHIP See Shining Sea $2,500 Gallery Mermaids 1,800 Artist Big Fish 910 Gallery Shells At Dawn 3,000 Gallery Sand Forever 1,090 Gallery Development! 4,200 Artist Taking a Chance 20,000 Gallery Tides and Moons 500 Gallery Mystery Sea 1,200 Gallery On the Beach 1,650 Artist Too Much Sun 4,775 Artist Spring Break 5,000 Artist Inland 7,880 Gallery Alligators Return 19,720 Artist Frost and Farm 14,300 Gallery