In: Accounting

Determine the net income of the consignor.

A well-known consignor consigned goods costing $1,560,000 to be sold at a total advertised selling price of $3,120,000. The consignee remitted $1,422,600 to its consignor after deducting the following charges: $52,500 cartage, $22,500 installation, and a commission equal to 20% of the sales proceeds after deducting the commission. Determine the net income of the consignor.


Expert Solution

Step 1: Determine the percentage of items sold over items consigned during the period.

Remittance 1,422,600
Cartage 52,500
Installation 22,500
Net remittance after commission 1,497,600
Add commission (20%) 299,520
Proceeds from sale of goods 1,797,120
Divided by total advertised price 3,120,000
Percentage of units sold 57.60%


Step 2: Compute for the net income.

Revenue from sale 1,797,120
Cost of sales:  
Purchase price (1,560,000 x 57.6%) (898,560)
Cartage (52,500 x 57.6%) (30,240)
Gross profit 868,320
Installation (22,500)
Commission (299,520)
Net income 546,300



Net income is $546,300.

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