Question
Legacy Ltd purchases gas cookers at Sh.3,500 each and sells them through consignees at Sh. 5,000 each. Each consignee is entitled to a commission of
Legacy Ltd purchases gas cookers at Sh.3,500 each and sells them through consignees at Sh. 5,000 each. Each consignee is entitled to a commission of 5% on sales from consigned goods and full recovery from sales made of any expenses incurred on the consigned goods.
The following transactions took place between Legacy Ltd and Wayu Ltd, a consignee, during the three-month period ended 30 June 2022:
1. Legacy Ltd sent 200 gas cookers to Wayu Ltd. and incurred the following costs:
Packing Sh16,000
Insurance - Sh. 30,000
Transport - Sh. 42,000
2. On receipt of the cookers, Wayu Ltd. incurred Sh. 12,000 on unpacking and preparing the cookers for sale.
3. Wayu Ltd, sold 160 cookers and incurred carriage out costs of Sh. 18,000. Other incurred by Wayu Ltd. in the period included casual wages Sh. 15,000, advertising expenses Sh. 5,000 and storage cost Sh.12,000.
4. Some customers returned gas cookers to Wayu Ltd. after experiencing gas leakage. Wayu Ltd. spent Sh. 10,000 to repair the cookers.
5. In order to sell 40 cookers, they were all fitted with additional safety gadgets at a total cost of Sh. 12,000 which was paid by Wayu Ltd.
6. Wayu Ltd. sold 30 of the cookers fitted with the additional safety gadgets at Sh.6,000 each.
7. Wayu Ltd sent ABC Ltd. an account sales on 30 June 2022 enclosing a cheque for Sh.800,000.
Required:
The accounts listed below in the books of ABC Ltd. for the three-month period ended
30 June 2022.
- Goods sent on consignment account. (5 marks)
- XYZ Ltd. account (6 marks)
- Profit and loss account for the three-month period ended 30 June 2006.
(4 marks)
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