Consignment Sales

AGENA MARIE SAN PABLO, CPA

 Consignment Arrangements
Under a consignment arrangement, an entity
(called the “consignor”) deliver goods to another
party (called the “consignee”) who undertakes to
sell the goods to end customers on behalf of the
consignor.
 Consignment Arrangements
The consignor recognizes revenue only when the
consignee sells the consigned goods to end
customers.
 Consignment Arrangements
Accordingly, the consigned goods remain in the
consignor’s inventory until they are sold to end
customer.
 Consignment Arrangements
Freight and other incidental costs that the
consignor incurs in transferring the consigned
goods to the consignee (e.g., transferring and
insurance) are capitalized as cost of the
consigned goods.
The following are examples of inventoriable
costs:
1. Shipping costs, freight and handling cost paid by
the consignor upon shipment
2. Freight and cartage paid by the consignee upon
receipt of the shipment
3. Packing expenses related to consigned goods.
4. Insurance of consigned goods
The following are examples of expenses that
are considered as an outright expenses
1. Delivery and installation
2. Commission
3. Advertising
4. Insurance while in transit
5. Reconditioning costs on delivered units
6. Expenses relating to returned units.
 Commission
The commission is recognized as expense by the
consignor and as income by the consignee.
Illustration
Vonne Inc. had the following consignment transactions during the
month of December 2030:
Inventory shipped on consignment to Cyrus Corp. 90,000
Freight paid by Vonne 4,500
Inventory received on consignment from Mike Inc. 60,000
Freight paid by Mike Inc. 2,500
No sales of consigned goods were made through December 31,
2030.
Vonne’s December 31, statement of financial position should
include consigned inventory at:
Illustration
The Oddessa Appliance Center sells goods to a third party via an
agent. During 2020, Oddessa supplies the agent with goods with a
sales value of P200,000. The agent charges a commission of 15%.
How much revenue should each of Oddessa and the agent
recognize in profit or loss for 2020?
Illustration
Bulldog Manufacturing Corp. consigned ten refrigerators to Poodle Sales Co. These
refrigerators had a cost of P180 each. Freight on the shipment was paid by Bulldog in the
amount of P120.
Poodles Sales Co. submitted an account sales stating that it had sold six refrigerators and
remitted P1,365 balance due Bulldog after the following deductions from the selling price
of the refrigerators:
Commission 15% of selling price
Marketing expenses P90
Delivery and installation of items sold P60
Cartage cost paid upon receipt of consignment P15

The consignee sold the 6 refrigerators for a total of

Illustration
Bulldog Manufacturing Corp. consigned ten refrigerators to Poodle Sales Co. These
refrigerators had a cost of P180 each. Freight on the shipment was paid by Bulldog in the
amount of P120.
Poodles Sales Co. submitted an account sales stating that it had sold six refrigerators and
remitted P1,365 balance due Bulldog after the following deductions from the selling price
of the refrigerators:
Commission 15% of selling price
Marketing expenses P90
Delivery and installation of items sold P60
Cartage cost paid upon receipt of consignment P15

The commission earned on the sale of the 6 refrigerators by Poodle Sales Co. was
Illustration
Bulldog Manufacturing Corp. consigned ten refrigerators to Poodle Sales Co. These
refrigerators had a cost of P180 each. Freight on the shipment was paid by Bulldog in the
amount of P120.
Poodles Sales Co. submitted an account sales stating that it had sold six refrigerators and
remitted P1,365 balance due Bulldog after the following deductions from the selling price
of the refrigerators:
Commission 15% of selling price
Marketing expenses P90
Delivery and installation of items sold P60
Cartage cost paid upon receipt of consignment P15

The consignor’s net profit from the sale of the consigned good was
Illustration
Norwin Co. shipped inventory on consignment to Viyan Co. that
cost P20,000. Viyan paid P500 for advertising that was reimbursable
from Norwin. At the end of the year, 70% of the inventory was sold
for P30,000. The agreement states that a commission of 20% will be
provided to Viyan for all sales.

What amount of net inventory on consignment remains on the

balance sheet for the first year for Norwin?
Illustration
Anton Corp consigned 25 shirts to Paul Inc. The cost of the shirt is P310 each.
Anton paid freight cost amounting to P500. The shirt is to be sold at P500
each payable P100 in the month of purchase and P20 per month thereafter.
Paul’s commission on consigned goods is 20%.
Paul Inc. was able to sell 15 shirts in July and 5 shirts in August. The regular
monthly collections by Paul and the appropriate cash remittances have been
made to Anton at the end of each month. The parties agreed that Paul is
allowed only to deduct a commission based on the amount collected from
consignment.

The cost of inventory on consignment in the hands of Paul Inc.

Illustration
Anton Corp consigned 25 shirts to Paul Inc. The cost of the shirt is P310 each.
Anton paid freight cost amounting to P500. The shirt is to be sold at P500
each payable P100 in the month of purchase and P20 per month thereafter.
Paul’s commission on consigned goods is 20%.
Paul Inc. was able to sell 15 shirts in July and 5 shirts in August. The regular
monthly collections by Paul and the appropriate cash remittances have been
made to Anton at the end of each month. The parties agreed that Paul is
allowed only to deduct a commission based on the amount collected from
consignment.

Anton’s net profit

Illustration
Anton Corp consigned 25 shirts to Paul Inc. The cost of the shirt is P310 each.
Anton paid freight cost amounting to P500. The shirt is to be sold at P500
each payable P100 in the month of purchase and P20 per month thereafter.
Paul’s commission on consigned goods is 20%.
Paul Inc. was able to sell 15 shirts in July and 5 shirts in August. The regular
monthly collections by Paul and the appropriate cash remittances have been
made to Anton at the end of each month. The parties agreed that Paul is
allowed only to deduct a commission based on the amount collected from
consignment.

Total remittance by Paul:

Illustration
GN Company shipped 150 units of its inventories to CL Company on
consignment. Each unit was purchased at a cost of P200 and can be sold at its
standard retail price of P450. Delivery of the 150 units from the supplier to
GN amounted to a total of P5,000. After a month, CL returned 10 units of
inventory and remitted P32,000 cash to GN together with an account sales
with the following items included:
• Commission of 20%
• Cartage on consigned goods, P1,600
• Marketing and promotional expenses, P1,500
• Delivery to customer and installation, P900
[Link] much is the cost of inventory still out on consignment at the end of
the month?
Illustration
GN Company shipped 150 units of its inventories to CL Company on
consignment. Each unit was purchased at a cost of P200 and can be sold at its
standard retail price of P450. Delivery of the 150 units from the supplier to
GN amounted to a total of P5,000. After a month, CL returned 10 units of
inventory and remitted P32,000 cash to GN together with an account sales
with the following items included:
• Commission of 20%
• Cartage on consigned goods, P1,600
• Marketing and promotional expenses, P1,500
• Delivery to customer and installation, P900

2. How much is the total consignment profit or (loss) recognized by GN?