Part B (6 marks)

On August 5, 2018, Famous Furniture shipped 40 dining sets on consignment to Furniture Outlet, Inc. The cost of each dining set was 350 each. The cost of shipping the dining sets amounted to 1,800 and was paid for by Famous Furniture. On December 30, 2018, the consignee reported the sale of 30 dining sets at 850 each. The consignee remitted payment for the amount due after deducting a 6% commission, advertising expense of 600, and installation and setup costs of 780.

Requirement

(a)Discuss the mechanism and accounting treatment for consignment sale. (2 marks)

(b)Calculate the cost of goods that should be recorded by Famous Furniture. Show workings. (2 marks)

(c)What is the net profit recognized by Famous Furniture? Show workings. (2 marks)