Consignment Sales

A.
Sales Revenue (20x3,000) 60000
Less:
COGS (200000*20/100)+(3000*20/30) 42000
Commission expenses (20*3000*5%) 3000 45000
Net Income of consignor 15000

Cash sales collected by consignee (20*3000) 60000

Less:
Freigh collect paid by consignee 3,000
Sales commission 3000 6,000
Net remittance by consignee to consignor 54,000

B.
Sales Revenue (100x500) 50000
Less: Commission expenses 5000
Payable for consigned pajamas 45000

C.
May June
0 32000

B Company commission income (32000*15) 4800

D.
Consignee's remittance 82,600
Add: Consignee's charges
Selling expenses 1,200
Cost of fan motor free 1,400
Delivery and installation 2,800 5,400
Selling price before commission 88,000
Add: Commission (88,000/88%*12%) 12000
Selling price after commission 100,000

Selling price after commission 100,000

Less:
COGS (9000*8) 72000
Freight out (600*8/12) 400
Total cost of inventory sold 72400
Consignee's charges 5,400
Commission 12000 89,800
Consignment profit 10,200
Revenue from Contracts with Customers

1. 5 Steps on Recognizing Revenue (1 point if all steps are given; if incomplete, no point)

a. Identify the contract with a customer.

b. Identify the separate perfomance obligation (PO).
c. Determine the transaction price (TP).
d. Allocate transaction price (TP) to the separate performance obligation (PO).
e. Recognize revenue when each performance obligation (PO) is satisfied.

2. Contract (1 point)

Contract is an agreement between two or more parties that created enforceable

rights and obligations.

3. Criteria to meet in order for the contract to exist for purposes of revenue recognition
(1 point if all criteria are given; if incomplete, no point)

a. The contract has commercial substance.

b. The entity can identify the payment terms.
c. The parties to the contract have approved the contract.
d. The entity can identify each party's rights regarding goods or services to be rendered.
e. It is probable that the entity will collect the consideration to which it will be entitled.

4. For the purpose of applying IFRS 15, a contract does not exist if both of the following are
true (1 point if all criteria are given; if incomplete, no point)

a. Contract is unperformed (Neither the seller nor the customer has performed any obligations
under the contract).
b. Both seller and the buyer can terminate the contract without penalty.

5. Performance obligation is a promise to transfer to the customer either: (1) a distinct good
or service; or (2) a series of distinct goods or services that are substantially the same and
have the same pattern of transfer. (1 point)

6. Transaction price is the amount of consideration to which an entity expects to be entitled in

exchange for transferring promised goods or services to a customer, excluding amounts
collected on behalf of third parties. (1 point)

7-8. An entity must consider three criteria to determine whether control over an asset is
transferred over time. If any one of these criteria is met, then the entity should recognize
revenue over time:

a. The customer simultaneously receives and consumes the benefits provided

by the entity’s performance as the entity performs.
b. The seller’s performance creates or enhances an asset controlled by the
customer as the asset is created or enhanced.
c. The entity’s performance does not create an asset with an alternative use to the entity,
and the entity has an enforceable right to payment for performance completed to date.

If the situation does not fall under any of the listed above, the revenue shall be recognized at
a point in time. (1 point for even one criteria given in over time and 1 point for at a point in time )

9. Distinct (1 point if all criteria are given; if incomplete, no point)

A good or service that is promised to customer is distinct if both of the following criteria are met:

a. The customer can benefit from the good or service. (Separate utility/benefit)
b. The entity's promise to transfer the good or service to the customer is separately identifiable
from other promises in the contract. (Separately identifiable)

10-11. (1 point for contract modification and 1 point for combination of contracts )
Contract Modification is a change in the scope or price (or both) of a contract that is approved by
the parties to the contract.

Combination of contracts
Contracts are combined when the goods or services promised in the contract are a single
performance obligation.

12. 2 Conditions to recognize new contract (1 point if all criteria are given; if incomplete, no point)

a. The scope of the contract increases because of the addition of promised goods or services
that are distinct.
b. The price of the contract increases by an amount of consideration that reflects the
entity's appropriate standalone selling prices of the additional promised goods or services
and any appropriate adjustments to that price.

13-14. Give a difference between contract asset and receivable

(1 point for contract asset and 1 point for receivable )

a. Contract Asset
is the entity's right to consideration in exchange for goods or services transferred to a customer

b. Receivable
is the entity's right to consideration that is unconditional

15-16. (1 point for costs to obtain contract and 1 point for costs to fulfil a contract )
Costs to obtain a contract are those costs which have been incurred to obtain a contract
that would not be incurred if not obtained.

Contract fulfilment costs are those costs which are required to be incurred in order
to fulfil (i.e. perform/deliver) a contract.

17. TRUE
If a customer pays, or an entity has a right to an amount of consideration before the entity
transfers a good or service to the customer, the entity shall recognize contract liability.

18. TRUE
If an entity performs before the customer pays consideration or before payment is due,
the entity shall recognize contract asset, excluding any amount presented as receivable.

19. FALSE
Revenue recognition under PFRS 15 is based on transfer of title.
transferred to a customer.

20. TRUE
Performance obligation is satisfied when the promised good or service is

Problems

1-6. (2 points each entry)

1-Aug-22 no entry

30-Sep-22 Contract Asset 80,000

Sales 80,000

Either periodic/perpetual method

31-Oct-22 Cash 80,000

Contract Asset 80,000

7-12. (2 points each entry)

1-Aug-22 no entry

30-Sep-22 Cash 80,000

Contract Liability 80,000

31-Oct-22 Contract Liability 80,000

Sales 80,000

Either periodic/perpetual method

13-20. (2 points each entry)

5-Jan-23 No entry
 15-Feb-23 Contract Asset 50,000
Sales 50,000

29-Jul-23 A/R 100,000

Contract Asset 50,000
Sales 50,000

15-Sep-23 Cash 100,000

A/R 100,000

(3 points for correct answer with solution; 1 point for incorrect answer with solution, no soution = no point)
21-23.

Original Performance Obligation 4000000

Additional Performance Obligation 1800000
Revenue after modification 5800000

24-26. 5,000x200 1,000,000.00

27-29. 5,000X180 900,000.00

30-32.
Original Performance Obligation 4000000
Additional Performance Obligation 1800000
Revenue after modification 5800000

33-35.
Blended Price 193.333333333333

5,000X193 965,000.00