Question

On July 2, Cardinal Corp. ships merchandise costing $ 460,000 on consignment to Dolphin Stores. Cardinal pays the freight of $ 10,000. Upon sale, Dolphin Stores will receive a 12% commission and a 6% allowance to offset its advertising expenses. At the end of the month, Dolphin notifies Cardinal that 50% of the merchandise has been sold for $ 560,000.

Instructions (show all calculations)

Record all the journal entries required by Cardinal Corp to account for this consignment.

Answer 1

Journal Entries :-

In the Books of Cardinal Corp.

Sr. No.	Particulars	Debit($)	Credit($)
1.	Consignment to Dolphin Stores A/c Dr.	460,000
	To Goods sent on consignment A/c		460,000
	(Being Goods sent on Consignment)
2.	Consignment to Dolphin Stores A/c Dr.	10,000
	To Cash A/c		10,000
	(Being Freight paid)
3.	Dolphin Stores A/c Dr.	560,000
	To Consignment to Dolphin Stores A/c		560,000
	(Being sales made by consignee)
4.	Consignment to Dolphin Stores A/c Dr. [560000*18%]	100,800
	To Dolphin Stores A/c		100,800
	(Being commission @ 12% and allowance @ 6% payable to Dolphin)
5.	Consignment Stock A/c Dr. [460000*50%]	230,000
	To Consignment to Dolphin Stores A/c		230,000
	(Being unsold goods lying at the premises of consignee)
6.	Consignment to Dolphin Stores A/c Dr.	219,200
	To Profit and Loss A/c		219,200
	(Being consignment profit transferred to Profit and Loss Account)
7.	Goods sent on consignment A/c Dr.	460,000
	To Trading A/c		460,000
	(Being Goods sent on consignment A/c closed and transferred to Trading A/c)

** Calculation of Consignment Profit Transferred to Profit and Loss A/c:

Consignment to Dolphin Stores A/c

Particulars	Debit($)	Particulars	Credit($)
To Goods sent on Consignment A/c	460,000	By Dolphin Stores A/c	560,000
To Cash A/c (Freight paid)	10,000	By Consignment Stock A/c	230,000
To Dolphin Stores A/c (Commission and allowances payable)	100,800
To Profit and Loss A/c (Balancing figure)	219,200
TOTAL	790,000	TOTAL	790,000