Consignment Sales

 It is where the owner of the goods (Consignor) wants to sell his goods through an intermediary
(Consignee), therefore the consigned goods is NOT the inventory of the Consignee.
 The Consignor ships his goods to the Consignee and the Consignee sells them to the final consumer.
 Revenue is recognized by the Consignor when the consigned goods is sold to the final consumer
(Revenue recognized at a point in time)
 Any directly related costs to the cosigned goods are inventoriable or capitalized costs
 Freight from consignor to consignee
 Cartage costs
 Insurance freight
 Packaging costs
 The following are considered outright expenses:
 Commissions
 Delivery and installation 
Advertising
 Reconditioning on delivered units to customers 
Insurance transit to customers
 Freight from consignee to customer
 Freight from consignee to consignor

Consignor Consignee
Shipment of goods from consignor Dr. Consignment inventory No entry
to consignee Cr. Merchandise inventory
Payment of expenses by consignor Dr. Consignment inventory No entry
Cr. cash
Payment of expenses by consignee Dr. Consignment inventory Dr. Consignor receivable
related to consigned goods Cr. Consignee payable Cr. Cash
Payment of expenses by consignee Dr. Expenses Dr. Consignor receivable
related to the sale of consigned Cr. Consignee payable Cr. Cash
goods
Sale of consigned goods to final No entry Dr. Cash
consumer Cr. Consignor payable
Recognition of sale by the consignor Dr. Consignee payable Dr. Consignor payable
and remittance of consignee of cash Dr. Cash Cr. Consignor receivable
due to consignor Dr. Commission expense Cr. Commission income
Cr. Sales Cr. Cash
Recognition of cost of goods sold Dr. Cost of goods sold No entry
Cr. Consignment inventory

Sales revenue X Cash/Net credit collections X

Cost of goods sold (x) Any payment made by consignee on behalf of consignor (X)
Gross profit X Commission (x)
Expenses (x)
Commission expenses (x)
Net income x Net remittance x

Part I: Theory of Accounts

1. Under IFRS 15, what is the specific point in time when the consignor satisfies is performance
obligation under consignment contract?
a. Upon delivery of consigned goods by consignor to consignee
b. Upon remittance of cash by consignee to consignor
c. Upon sale of consigned goods by consignee to final consumers
d. Upon signing of contract of consignment by consignor and consignee
2. Under IFRS 15, how does a consignor satisfy its performance obligation under consignment
contract?
a. Satisfaction over a period a period of time
b. Satisfaction at a specific point in time
c. Either A or B
d. Neither A nor B

3. When the consignor ships merchandise out for consignment to the consignee, in the books of the
consignee, it involves a
a. Debit to Consignment Inventory account
b. Debit to Merchandise Inventory account
c. Credit to Consignor Payable account
d. Memo entry

4. Which of the following is considered capitalizable or inventoriable cost?

a. Commission
b. Advertising
c. Freight from the consignor to consignee
d. Freight from the consignee to consignor

5. When the consignee pays expenses which is reimbursable on behalf of the consignor, in the
books of
the consignor it involves a
a. Debit to Consignor Receivable account
b. Credit to Cash
c. Credit to Consignment Inventory account
d. Credit to Consignee Payable account

Part II: Problem Solving

Problem 1

Consignor consigned 10 items to consignee and the items had a cost of P21,600 each. The freight
from consignor to consignee amounting to P14,400 was paid by the consignor. The sales price of
each item was P36,000. They also agreed that the consignee shall have a 15% commission based on
the sales. The following costs were paid by the consignee on behalf of the consignor: Selling
expense P18,000; cartage cost upon receipt of the consigned goods P1,800. At the end of the
year, consignee sold 6 items to customers.
 1. What is the net income of the consignor at the end of the year?
a. 25,560
b. 58,680
c. 26,280
d. 55,800
2. What is the amount of the net remittance to the consignor?
a. 163,800
b. 196,200
c. 216,000
d. 164,700

Problem 2

Below is a consignment out account in the books of Entity A for the goods out on consignment to
Entity B:

CONSIGNMENT OUT - ENTITY B

Sept. 1 Shipped (10 items at cost) P3,500 Sept 30. Sales (7 items) P4,200
Freight-out 300

The following also were charges made by

EntityB:

Sept. 30 Delivery expenses P175

Commission (20%) 840

1. What is the net income of the consignor for the month of September?
a. 1,275.00
b. 525.00
c. 435.00
d. 577.50
Use the following information for the next two (2) questions:

On December 1, 2020, Shamrock Inc delivered 10 boxes of Otap bread and 10 packs of sample bred for tasting
purposes, to 24/7 retail store on a consignment arrangement The retail store does not take title to the products and has
no obligation to pay Shamrock lnc. until they are sold to final costumers. Any unsold products, excluding those that are
lost or damages, can be returned to Shamrock Inc. and the latter has discretion to call products back or transfer
products to another customer.

Shamrock manufacturers the product at a cost of P5,000 per box of Otap bread and P100 per pack of sample bread.
There is right collect of P2,000 for the delivery of 10 boxes of Otap bread to 24/7 but not for the sample bread. The
selling price of the Otap product is P8 000 per box for cash sales and P10,000 per box for credit sales with term of
2/10 n/30. The retail store is entitled to a 5% commission on cash sales and 10% Commission on net credit sales
already collected The retail store has the right to be reimbursed for the freight it incurred for its delivery to final
customers. Shamrock Inc. provides bad debt expense at an estimate of 8% based on ending receivables.

For the month ended December 31, 2020 24/7 retail store was able to sell to final consumers 3 boxes of Otap bread
on cash basis and 5 boxes of Otap bread on account. There is freight prepaid of P3,000 for the delivery of boxes of
Otap bread to final consumers. Also, five packs of sample bread were consumed by final costumers during the tasting
period.

The customers on account paid to 24/7 three out of five boxes sold on credit within the discount period but the
remainder continued to be unpaid as of December 31,2020 On. December 31, 2020, 24/7 Retail store made its net
remittance to Shamrock Inc.

1. Under PFRS 15, what is Shamrock’s net income for 20x20 in connection with the consignment arrangement?
A. P22,560 B. P21,240 C. P20,520 D. P23,420

2. Under PFRS 15, what is 24/7’s net remittance to Shamrock on December 31, 20x20?
A. P44,260 B. P45,320 C. P41,140 D. P42,240

CONSIGNMENT SALES

Use the following information for the next two (2) questions:

Parco, Inc. consigned twelve refrigerators to Finac’s Emporium. The refrigerator cost P6,000 each and the consignor
paid P720 for freight out. The consignee subsequently rendered an account sales for five units sold at P7,700 each, and
deducted the following items from the selling price:
Commission (based on sales net of commission) 10%
Marketing expenses (based on commission) 10%
Delivery and installation (on each unit sold) P30

1. How much was the net profit of the consignor on the five refrigerators sold?
A. P3,815 B. P37,780 C. P4,200 D. P3,395

2. How much was the net remittance of the consignee on the five refrigerators?
A. P34,500 B. P33,780 C. P4,500 D. P4,200

Use the following information for the next three (3) questions:

On June 1, DD Company shipped twenty five DVD to BB View Store on consignment. The DVD is to be sold at an
advertised price of P200 per item. The cost of each DVD to the consignor is P100. The consignor paid P75 to ship the
merchandise. Commission is to be 25% of sales price. During the month, two DVD were returned. On June 30, BB
View Store remitted the amount due to consignor after deducting commission of P400.
3. The amount remitted by BB View Store is
A. P1,100 B. P1,600 C. P1,200 D. P2,000

4. The consignment profit is

A. P370 B. P415 C. P720 D. P800

5. The cost of inventory on consignment amounted to

A. P1,400 B. P1,550 C. P1,545 D. P1,500

Use the following information for the next two (2) questions:

Silver Works Manufacturing Company consigned 5 dozens of stainless chairs to Ube Furniture Co. on April 1, 20X1.
Each chair cost P120 and the consignor paid P600 for the cartage to the consignee. On August 15, 20X1, 36 chairs
were already sold and the consignee rendered an account sales, and remitted the balance due to the consignor in the
amount of P5,580 after deducting the following:
Commission at 15% of the selling price ?
Selling expenses P360
Delivery and installation 180

6. How much is the profit on consignment?

A. P660 B. P900 C. P1,000 D. P1,260

7. The cost of the inventory on consignment in the hand of Urban Furniture Company is
A. P2,880 B. P3,120 C. P3,480 D. P4,320

Use the following information for the next two (2) questions:

On January 1, 20X1, Pacman Electrical Shop received from Fighter Trading 300 pieces of bread toasters. Pacman
was to sell these on consignment at 50% above cost, for a 15% commission on the selling price.

The consigned goods cost Fighter Trading P200 per unit, and P900 had been paid to ship them to Pacman Electrical
Shop. All expenses in connection with the consignment were reimbursable to the consignee.

After selling 200 pieces, Pacman had the remaining unsold units repaired for some electrical defects for which he
spent P2,000. Fighter subsequently increased the selling price of the remaining units to P330 per unit.

On January 31, 20X1, Pacman remitted P64,980 to Fighter after deducting the 15% commission, P850 for delivery
expenses of sold units, and P2,000 for the repair of 100 units.

8. The consignment profit on the units sold was:

A. P12,200 B. P12,880 C. P13,000 D. P14,000

9. The value of inventory on consignment was:

A. P8,120 B. P8,800 C. P8,920 D. P9,820

Use the following information for the next two (2) questions:

Credit Manufacturing Co. consigned to Debit Trading Corporation twelve (12) Sonly Colored TV sets which cost P9,000
each. Freight out was paid by the consignor in the amount of P600. Debit Trading sold eight (8) sets, rendered an
account sales, and remitted the amount of P82,600 after deducting the following from the selling price of the sets
sold:

Commission on selling price 12%

Selling expenses P1,200
Cost of antennae give free 1,400
Delivery and installation 2,800

10. The total selling price of the eight (8) sets sold by Credit Trading Corporation is
A. P100,000 B. P88,000 C. P98,560 D. P78,571.43

11. The net profit of CR Manufacturing Co. on the eight (8) sets sold by Credit Trading Corporation is
A. P40 B. P9,332.80 C. P10,200 D. P10,600