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QUIZ Chapter-9 Consignment- Sales 2020- Edition
ACC 110 Special Transactions
Course
Accounting (ACC 156)
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University of Iloilo - PHINMA
Academic year: 2024/2025
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Chapter 9
Consignment Sales
NAME: Date:
Professor: Section: Score:
QUIZ
1. In a consignment arrangement, which party bears which type of risk?
Inventory risk Credit risk
a. Consignor Consignor
b. Consignor Consignee
c. Consignee Consignor
d. Consignee Consignee
2. ABC Co. produces a wide variety of frozen foods. Due to the faltering economy, ABC
closed its provincial sales outlets. Instead, ABC outsourced various distributors to sell
its products. Each distributor accepting delivery shall pay ABC 10% of the factory
selling price of the goods delivered and accepted. However, if the distributor fails to
sell all of the goods accepted before their expiration dates, ABC is obligated to
repurchase the unsold goods. In June 20x1, ABC delivered goods with total factory
selling price of ₱10,000,000 to its distributors. ABC received 10% of the total factory
selling price of the goods delivered. When should ABC recognize revenue from the
goods delivered?
a. When the goods are shipped to the distributor.
b. When the goods are sold to the ultimate customers.
c. When the distributor pays ABC Co.
d. When ABC receives the 10% of the total factory selling price of the goods
delivered.
3. Black Co., a consignee, paid the freight costs for goods shipped from White Co., a
consignor. These freight costs are to be deducted from Black’s payment to White
when the consignment goods are sold. Until Black sells the goods, the freight costs
should be included in Black’s
a. Cost of goods sold c. Selling expenses
b. Freight-out costs d. Receivable
4. Goods on consignment should be included in the inventory of
a. the consignee but not the consignor.
b. the consignor but not the consignee.
c. both the consignor and consignee.
d. neither the consignor nor the consignee.
5. Micrium, a computer chip manufacturing company, sells its products to its
distributors for onward sales to the ultimate customers. Due to frequent fluctuations
in the market prices for these goods, Micrium has a “price protection” clause in the
distributor agreement that entitles it to raise additional billings in case of upward
price movement. Another clause in the distributor’s agreement is that Micrium can at
any time reduce its inventory by buying back goods at the cost at which it sold the
goods to the distributor. Distributors pay for the goods within 60 days from the sale of
goods to them. When should Micrium recognize revenue on sale of goods to the
distributors?
a. When the goods are sold to the distributors.
b. When the distributors pay to Micrium the cost of the goods (i., after 60 days of
the sale of goods to the distributors).
c. When goods are sold to the distributor provided estimated additional revenue is
also booked under the “protection clause” based on past experience.
d. When the distributor sells goods to the ultimate customers and there is no
uncertainty with respect to the “price protection” clause or the buyback of goods.
6. On November 30, 20x1, Northup Co. consigned 90 freezers to Watson Co. for sale at
₱1,600 each and paid ₱1,200 in transportation costs. A report of sales was received on
December 30, 20x1 from Watson reporting the sale of 20 freezers, together with a
remittance that was net of the agreed 15% commission. How much, and what month,
should Northup recognize as sales revenue?
November December
a. 0 32,
b. 0 27,
c. 144,000 0
d. 142,800 0
7. On December 1, 20x1, Alt Department Store received 505 sweaters on consignment
from Todd. Todd’s cost for the sweaters was ₱80 each, and they were priced to sell at
₱100 each. Alt’s commission on consigned goods is 10%. At December 31, 20x1, 5
sweaters remained. In its December 31, 20x1 balance sheet, what amount should Alt
report as payable for consigned goods?
a. 49,
b. 45,
c. 45,
d. 40,
8. Aircon, Inc. consigned ten one-horsepower air conditioning units to Argy Trading and
paid ₱2,000 for the freight. The consignee is allowed a commission of 5% on sales.
Argy Trading submitted the following report at the end of the period:
Sales (6 units) 72,
Less: Advances to
Aircon, Inc.
10,
0
Selling expenses 800
Installation and
delivery 1,
Commission 7,200 19,
Net remittance 52,
The selling expenses and the installation and delivery costs are chargeable to Aircon.
Aircon consistently marks-up its inventories at a 12% gross profit rate based on sales
price. This does not reflect any freight. How much was Aircon’s profit or loss on the
consignment?
a. 52,800 profit
b. 7,800 loss
c. 2,200 profit
d. 1,400 loss
SOLUTIONS:
1. A
2. B
3. D
4. B
5. D
6. A (20 x 1,600) = 32,
7. C (505 – 5) x ₱100 x 90% = 45,
8. C
Solution:
Gross profit from sale (excluding freight) (72K x 12%) 9,
Freight (2K x 6/10) (1,200)
Commission (adjusted) (72K x 5%)... not 10% (3,600)
Selling expenses (800)
Installation and delivery (1,200)
Profit 2,
9. A (See solution below)
10. B
Solution
The total unit cost is computed as follows:
Cost of consigned goods (1M x 8) 8,000,
Freight 200,
Total goods available for sale (in pesos) 8,200,
Divide by: TGAS (in units) 8
Total unit cost 1,025,
The number of unsold units is computed as follows:
Ending inventory 3,075,
Divide by: Total unit cost 1,025,
Unsold units 3
The number of units sold is computed as follows:
TGAS (in units) 8
Unsold units (3)
No. of units sold 5
Profit of consignor is computed as follows:
Total sales (2,100,000 x 5) 10,500,
Cost of goods sold (a) (5,125,000)
Gross profit 5,375,
Commission (b) (1,750,000)
Finder's fee (1,750,000 x 5%) (87,500)
Delivery, installation & testing (50,000 x 5) - 5,000 scrap (245,000)
Profit 3,292,
(a) Cost of goods sold is computed as follows:
Total unit cost 1,025,
No. of units sold 5
Cost of goods sold 5,125,
(b) The commission is computed as follows:
We will use the following formula for bonus after bonus:
B = P – [P ÷ (1 + Br)]
Commission = Gross sales – [Gross sales ÷ (1 + Commission rate)]
Commission = 10,500,000 – [10,500,000 ÷ (1 + 20%)]
Commission = 10,500,000 – 8,750,
Commission = 1,750,
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QUIZ Chapter-9 Consignment- Sales 2020- Edition
Course: Accounting (ACC 156)
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Students shared 180 documents in this course
University: University of Iloilo - PHINMA
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P a g e | 1
Chapter 9
Consignment Sales
NAME: Date:
Professor: Section: Score:
QUIZ
1. In a consignment arrangement, which party bears which type of risk?
Inventory risk Credit risk
a. Consignor Consignor
b. Consignor Consignee
c. Consignee Consignor
d. Consignee Consignee
2. ABC Co. produces a wide variety of frozen foods. Due to the faltering economy, ABC
closed its provincial sales outlets. Instead, ABC outsourced various distributors to sell
its products. Each distributor accepting delivery shall pay ABC 10% of the factory
selling price of the goods delivered and accepted. However, if the distributor fails to
sell all of the goods accepted before their expiration dates, ABC is obligated to
repurchase the unsold goods. In June 20x1, ABC delivered goods with total factory
selling price of ₱10,000,000 to its distributors. ABC received 10% of the total factory
selling price of the goods delivered. When should ABC recognize revenue from the
goods delivered?
a. When the goods are shipped to the distributor.
b. When the goods are sold to the ultimate customers.
c. When the distributor pays ABC Co.
d. When ABC receives the 10% of the total factory selling price of the goods
delivered.
3. Black Co., a consignee, paid the freight costs for goods shipped from White Co., a
consignor. These freight costs are to be deducted from Black’s payment to White
when the consignment goods are sold. Until Black sells the goods, the freight costs
should be included in Black’s
a. Cost of goods sold c. Selling expenses
b. Freight-out costs d. Receivable
4. Goods on consignment should be included in the inventory of
a. the consignee but not the consignor.
b. the consignor but not the consignee.
c. both the consignor and consignee.
d. neither the consignor nor the consignee.
5. Micrium, a computer chip manufacturing company, sells its products to its
distributors for onward sales to the ultimate customers. Due to frequent fluctuations
in the market prices for these goods, Micrium has a “price protection” clause in the
distributor agreement that entitles it to raise additional billings in case of upward
price movement. Another clause in the distributor’s agreement is that Micrium can at
any time reduce its inventory by buying back goods at the cost at which it sold the
goods to the distributor. Distributors pay for the goods within 60 days from the sale of
goods to them. When should Micrium recognize revenue on sale of goods to the
distributors?
a. When the goods are sold to the distributors.
b. When the distributors pay to Micrium the cost of the goods (i.e., after 60 days of
the sale of goods to the distributors).
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