For the period ending December 31, 2020, the consignor will report a net loss from this consignment arrangement amounting to:

On September 1, 2020, a consignor consigned 10,000 units of inventory which costs P12 per unit and sells for P15 per unit. Freight charges of P15,000 were paid by the consignee. The consignee was able to sell 6,000 units from September 1 to November 30, 2020, and incurred. On December 1, 2020, the products were marked to sell for P13 per unit to accommodate the Christmas rush. During December, the consignee was able to sell 3,000 more units. The discounted price lasted until February 28, 2021. The consignee is entitled to a commission of 10% of the selling price of the products. For the period ending December 31, 2020, the consignor will report a net loss from this consignment arrangement amounting to:

Solutions

Expert Solution

Revenue
First sale (6,000 x P15)	90,000
Second sale (3,000 x P13)	39,000
Cost of sale (9,000 x P13.5)*	(121,500)
Commission (10%)	(12,900)
Inventory write-down**	(1,800)
Total	(7,200)

*Purchase price + Freight

*NRV is selling price less cost to sell (P13 less P1.3 commission = P11.7), since inventories are carried at LCNRV. The cost of the remaining 1,000 units amounting to P13,500 will be brought down to NRV and the consignor will record an inventory write-down of P7,200 (P13,500 cost versus P11,700 NRV).

The consignor will report a net loss from this consignment arrangement amounting to 7,200.

Renze Joy Candido answered 2 years ago

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