Question

On May 3, 2017, Nassau Company consigned 80 freezers, costing $500 each, to Exuma Company. The cost of shipping the freezers amounted to $840 and was paid by Nassau Company. On December 30, 2017, a report was received from the consignee, indicating that 40 freezers had been sold for $750 each. Remittance was made by the consignee for the amount due after deducting a commission of 6%, advertising of $200, and total installation costs of $320 on the freezers sold.

Instructions: i) Compute the amount of cash that will be remitted by the consignee to the consignor,

and ii) Prepare the journal entry of the consignor to record the sale, expenses and cash remittance

Answer 1

Amount of cash that will be remitted by the consignee to the consignor:

= Sales - Commission - Advertising - Installation Costs

= (40 * 750) - (40 * 750 * 6%) - 200 - 320

= 30,000 - 1,800 - 200 - 320

= 30,000 - 2,320

= $27,680

S.No.	Account Titles & Explanation	Debit	Credit
a)	Consignment (80 * 500)	$   40,000
	Goods sent on Consignment		$   40,000
	(To record goods sent on consignment)
b)	Exuma Company	$   30,000
	Consignment (40 * 750)		$   30,000
	(To record sales made by consignee)
c)	Consignment (1,800 + 200 + 320)	$     2,320
	Exuma Company		$     2,320
	(To record expenses)
d)	Bank	$   27,680
	Exuma Company		$   27,680
	(To record remittance by consignee)