Consignment sales

Problem 1

On October 20, 2016, Abrahan company consigned 40 freezers to Holden Company costing P14,000 each for sale of P20,000 each and paid P16,000 in transportation costs. On December 30, 2016, Holden reported the sale of 10 freezers and remitted P170,000. The remittance was net of the agreed 15% commission.

Q1: What amount should Grimm recognize as consignment sales revenue for 2016?

Problem 2

The following information was derived from the 2016 accounting records of SHARK Co.:

SHARK's Central Warehouse SHARK's Goods Held by Consignees

Beginning P55,000 P6,000

Inventory

Purchases 240,000 30,000

Freight-in5,000

Transportation to 2,500

consignees

Freight-out 4,000

Ending inventory 10,000

Q2: What is SHARK's 2016 cost of sales?

Problem 3

Bulldog Manufacturing Corp. consigned ten refrigerators to Poodles Sales Co. These refrigerators had a cost of P180 each. Freight on the shipment was paid by Bulldog in the amount of P120.

Poodle Sales Co. submitted an account sales stating that it had sold six refrigerators and remitted the P1,365 balance due Bulldog after the following deductions from the selling price of the refrigerators:

Commission 15% of selling price

Marketing expenses P90

Delivery and installation of items sold P60

Cartage cost paid upon receipt of consignment P15

Q3 - The consignee sold the 6 refrigerators for a total of ____.

Q4 - The commission earned on the sale of the 6 refrigerators by Central Sales Co. was ____.

Q5 - The consignor's net profit from the sale of the consigned goods was ____.

Problem 4

Norwin Co. shipped inventory on consignment to Viyan Co. that cost P20,000. Viyan paid P500 for advertising that was reimbursable from Norwin. At the end of the year, 70% of the inventory was sold for P30,000. The agreement states that a commission of 20% will be provided to Viyan for all sales.

Q6 - What amount of net inventory on consignment remains on the balance sheet for the first year for Norwin?

Installment sales

Problem 5

The Japan Homes Corporation started operations on January 1, 2017 selling home appliance and furniture sets both for cash and on instalment basis. Data on the instalment sales operations of the company gathered for the years ending December 31, 2017 and 2018 were as follows:

2017 2018

Installment SalesP1,200,000 P1,500,000

Cost of Installment Sales720,0001,050,000

Cash collected on instalment sales

2017 installment contracts630,000450,000

2018 installment sales 900,000

On January 6, 2018 an instalment sale in 2017 was defaulted and the merchandise was repossessed. The fair market value of the merchandise after reconditioning costs amounted to P15,000. There is a 10% normal profit based on estimated resale value, the corporation incurred P3,000 disposal costs and P5,000 reconditioning cost. Related instalment receivable balance on January 6, 2018 was P17,000. The operating expenses incurred in 2017 and 2018 amounted to P50,000 and P100,000, respectively.

Q7 - What is the gross profit rate 2017 and 2018, respectively?

Q8 - What is the Deferred Gross Profit as of 2018 form 2017 sales?

Q9 - How much is the amount of estimated resale value?

Q10 - What is the amount to be debited as the value of Repossessed Merchandise at a time of repossession?

Q11 - How much is the gain/(loss) on repossession?

Q12 - How much is the RGP after gain or (loss) on repossession in December 31, 2017?

Q13 - How much is the RGP after gain or (loss) on repossession in December 31, 2018?

Problem 6

SUN CELL Company sold Cellphones on instalment basis on July 1, 2018. The Unit cost to the company was P388,800, but the instalment selling price was set at P550,800. Terms of payment included the acceptance of used Cellphones with trade in allowance of P194,400. Cash of P32,400 was paid in addition to the traded in Cellphones with the balance to be paid in ten monthly instalments due at the end of each month commencing the month after the month of sale. It would require P8,100 to recondition the used Cellphones so that it could be resold for P162,000. A 15% gross profit was usual from the sale of used cellphones.

Q14 - How much is the fair value traded in merchandise?

Q15 - How much is the under/ (over) allowance in trade in?

Q16 - What is the Gross Profit rate?

Q17 - How much is the monthly payment?

Q18 - How much is the total Realized Gross Profit in 2018?

Insurance Contract

Problem 7

AAA Insurance Company issues one year, motor/vehicle insurance for a total premium of

P15,000. If it was issued on January 1, 2019,

Q19 -How much is the earned portion for the month ended January 31, 2019?

Q20 - How much is the earned portion for the month ended December 31, 2019?

Q21 - How much is the unearned portion for the month ended January 31, 2019?

Q22 - How much is the unearned portion for the month ended December 31, 2019?

Q23 - How much is the provision for unearned premium on December 31, 2019?

Problem 8

On January 1, 2019, AAA insurance co. entered into reinsurance contract with CCC Co. for a premium of P2,000. Commission expense incurred on the reinsurance contract issued is 10%.

Q24 - How much is the amount due from ceding company (book of reinsurer)?

Q25 - How much is the amount of commission income recognized by cedant?