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Consignment and Franchise Assignment ILAGAN

General Company consigned five computers worth P8,000 each to Xaviery Computers for sale. Xaviery sold three computers, two for cash of P15,000 each and one on credit for P18,000 with a 25% downpayment. Xaviery remitted P24,100 to General after deducting freight and commission charges. The consignment resulted in a net income of P13,680 for General Company. Two computers and part of the freight charges remained in inventory on consignment with Xaviery, totaling P18,080.

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282 views4 pages

Consignment and Franchise Assignment ILAGAN

General Company consigned five computers worth P8,000 each to Xaviery Computers for sale. Xaviery sold three computers, two for cash of P15,000 each and one on credit for P18,000 with a 25% downpayment. Xaviery remitted P24,100 to General after deducting freight and commission charges. The consignment resulted in a net income of P13,680 for General Company. Two computers and part of the freight charges remained in inventory on consignment with Xaviery, totaling P18,080.

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ELIZABETH B.

ILAGAN

BSA 302A

1. General Company consigned five computer equipments, with cost of P8,000 each, to the
Xaviery Computers which was to sell these goods for the account and risk of the former for a
commission of 15% of selling price. The General Company paid trucking costs of P2,000 on the
shipment. Correspondingly, Xaviery Computers paid P3,200 on the freight of the shipment

On the last day of the year. Xaviery Computers reported that it sold three of the computers: two
for cash at P15,000 each and one on credit at P18,000 of which 25% was collected as
downpayment. Xaviery Computers remitted all the cash due. The amount remitted by Xaviery
Computers is:

Collections

Cash Sales (Php15,000 x 2) Php 30,000

Credit Sales (Php 18,000 x 25%) 4,500

Total Php 34,500

Less: Charges

Freight 3,200

Commission (Php 30,000+18,000 x 15%) 7,200 (10,400)

Total Remittance Php 24,100

2. General Company consigned five computer equipments, with cost of P8,000 each, to the
Xaviery Computers which was to sell these goods for the account and risk of the former for a
commission of 15% of selling price. The General Company paid trucking costs of P2,000 on the
shipment. Correspondingly, Xaviery Computers paid P3,200 on the freight of the shipment

On the last day of the year. Xaviery Computers reported that it sold three of the computers: two
for cash at P15,000 each and one on credit at P18,000 of which 25% was collected as
downpayment. Xaviery Computers remitted all the cash due. The consignment net income
(loss) is:

Sales Php 48,000

COGS* (27,120)

Gross Profit Php 20,880

Commission Expense (7,200)

Net Income Php 13,680


COGS

Cost of Computers (8,000 x 3) = 24,000

Freight in ((2,000 + 3,200) x 3/5) = 3,120

TOTAL COGS 27, 120

3. General Company consigned five computer equipments, with cost of P8,000 each, to the
Xaviery Computers which was to sell these goods for the account and risk of the former for a
commission of 15% of selling price. The General Company paid trucking costs of P2,000 on the
shipment. Correspondingly, Xaviery Computers paid P3,200 on the freight of the shipment

On the last day of the year. Xaviery Computers reported that it sold three of the computers: two
for cash at P15,000 each and one on credit at P18,000 of which 25% was collected as
downpayment. Xaviery Computers remitted all the cash due. The amount of inventory on
consignment of General Company is:

Unsold Computer 8,000 x 2 = 16,000

Inventoriable Freight 5,200 x 2/5 = 2,080

INVENTORY ON CONSIGNMENT Php 18,080

4. On July 15, 20x6, James Last Sales Company received a shipment of merchandise with a
selling price of P150,000 from James Bond Company. The consigned goods cost James Bond
Company P100,000 and freight charges of P1,200 had been paid to ship the goods to James
Last Company.

The consignment agreement provided for a sale of merchandise on credit with terms of 2/10,
n/30. The 15% commission is to be based on the accounts receivable collected by the
consignee. Cash discounts taken by customers, expenses applicable to goods on consignment
and any cash advanced to the consignor are deductible from the remittance by the consignee.

James Last Company advanced P60,000 to James Bond Company upon receipt of the
shipment. Expenses of P8,000 was paid by James Last. By August 20x6, 70% of the shipment
had been sold, and 80% of the resulting accounts receivable had been collected, all within the
discount period. Remittance of the amount due was made on August 30, 20x6. The cost of
unsold units in the hands (merchandise on consignment) of James Last is:
Cost Php 100,000

Inventoriable Freight 1,200

Cost of each unit unsold 101,200

30%

COST OF UNSOLD UNIT Php30,360

5. On January 1, 2020, an entity granted a franchise agreement to a franchisee. The contract


provided that the franchisee shall pay an initial franchise fee of P500,000 and on-going payment
of royalties equivalent to 8% of the sales of the franchisee. On January 1, 2020, the franchisee
paid down payment of P200,000 and issued a 3-year noninterest bearing note for the balance
payable in three equal annual installments starting December 31, 2020. The note has present
value of P240,183 with effective interest rate of 12%.
On June 30, 2020, the entity completed the performance obligation of the franchise at a cost of
P352,146. Aside from that, the administrative cost of P22,009.
The franchise started operation on July 1, 2020 and reported sales revenue amounting to
P50,000 for the year ended December 31, 2020. The franchisee paid the first installment on its
due date.
What is the net income to be reported by the entity for the year ended December 31, 2020?
IFF (200,000 + 240,183) Php 440,183
CFF (8% x 50,000) 4,000
Int. Income (240,183 x 12% x 12/12) 28,822
Total Revenue 473,005
Less Costs:
(352, 146)
(22,009) (374,155)
NET INCOME PHP 98,850
6. Bren Inc. charges an initial franchise fee of P75,000 for the right to operate as a franchisee of
Bren. Of this amount, P25,000 is collected immediately. The remainder is collected in four equal
installments of P12,500 each. These installments have a present value of P41,402. As part of
the total franchise fee, Bren Inc., also provides training (with a fair value of P2,000) to help
franchisees get the store ready to open. The franchise agreement is signed on April 1, 20x5,
training is completed, and the store opens on July 1, 20x5.
The amount of revenue from training and franchise on July 1, 20x5 amounted to:
From training = 0 (no allocation)
7. Assume that, on April, 20x6, a customer visits Micro hardware.com (a computer store) and
purchases MicrohardDoors 7 Ultimate (software) for P170,000. Doors 7 Ultimate software
comes with a DVD format which the customer can use permanently, and Microhard does not
expect that its actions subsequent to April 1 20x6 will affect the value of customer obtains from
using the software. How much revenue should Microhard recognize in 20x6 with respect to this
particular transaction?
Revenue = 170,000
8. On January 1, 2020, an entity granted a franchise agreement to a franchisee. The contract
provided that the franchisee shall pay an initial franchise fee of P500,000 and on-going payment
of royalties equivalent to 8% of the sales of the franchisee. On January 1, 2020, the franchisee
paid down payment of P200,000 and issued a 3-year noninterest-bearing note for the balance
payable in three equal annual installments starting December 31, 2020. The note has present
value of P240,183 with an effective interest rate of 12%.
On June 30, 2020, the entity completed the performance obligation of the franchise at a cost of
P352,146. Aside from that, the administrative cost of P22,009.
The franchise started operation on July 1, 2020, and reported sales revenue amounting to
P50,000 for the year ended December 31, 2020. The franchisee paid the first installment on its
due date.
What is the gross profit to be recognized by the entity for the year ended December 31, 2020 in
relation to the initial franchise fee?
IFF 440,183
Cost 352, 146
GROSS PROFIT 88,037

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