Question

Jansen Corporation shipped $20,000 of merchandise on consignment to Gooch Company. Jansen paid freight costs of $2,000. Gooch Company paid $500 for local advertising, which is reimbursable from Jansen. By year-end, 60% of the merchandise had been sold for $21,500. Gooch notified Jansen, retained a 10% commission, and remitted the cash due to Jansen.

1. Compute the inventory value of the units unsold in the hands of the cosignee (Gooch).

2. Compute the profit for the cosignor (Jansen) for the units sold.

3. Provide Journal entries for cosignor (Jansen) and cosignee (Gooch), respectively, to record the notification of sales and remittance of amount due to cosignor.

PLEASE SHOW WORK

Answer 1

1) Ans

Inventory value of Unsold Stock=Value of Goods sent –Value of Goods sold

Value of goods sent=$20,000

Value of Goods sold=$20,000(100%-60%)=$8000

2) Profit For the consignor for units sold=Value of Goods sold by consignee- Commission and other expenses of Consignee

Value of Goods sold =$21500

Commission=2150(21500*10%)

Advertising Expenses=$500

Profit=21500-2150-500=$18,850

3)Ans:

Account Titles and Explanation	Debit	Credit
Cash	$18,850
Advertising expense	$500
Commission expense	$2,150
Revenue from consignment sale		$21,500
Cash received is =[ $21,500 – $500 – ($21,500 X 10%)]
(To record the cash remitted to Jansen.)
Cost of goods sold	$13200
Inventory on consignment		$13200
[60% X ($20,000 + $2,000)]
(To record the cost of inventory sold on consignment.)