No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

CONSIGNMENT

TRUE OR FALSE
1. A consignment is a marketing arrangement/method whereby the owner or seller
(consignee) transfers physical possession of goods to another party (consignor) who acts
as an agent for the consignor to sell the goods.

2. Revenue should be recognised when a good or service is transferred to the customer. An

entity transfers a good or service when the customer obtains control of that good or
service.

3. A product is held on consignment if the consignee has physical possession of a good, but
has not obtained control. An entity should not recognise revenue for products held on
consignment upon delivery.

4. Title to consigned merchandise remains with the consignor until a sale is made to the
ultimate buyer.

5. The consignee has the right to receive compensation for selling the goods.

6. The consignee does not have right to reimbursement for advances and necessary
expenses incurred in connection with the consignment.

7. The consignee cannot, without the express or implied consent of the consignor sell on
credit.

8. The consignee’s obligation is to care for and protect the goods in a responsible manner.

9. Inventory on consignment includes the cost of unsold merchandise, deferred consignment

expense and freight out.

10. Reimbursable expenses are deducted from sales to compute the remittance. These
reimbursable expenses include freight collect paid by the consignee, freight out paid by
the consignee, freight paid by the consignee for the returned goods and Local advertising
paid by the consignee.

11. Charges by the consignee include reimbursable expenses, commission and advances.

12. Transaction costs or direct costs are not treated as outright expenses .

13. The transaction cost in relation to sold merchandise and returned merchandise will
become part of cost of good sold.

14. The transaction cost in relation to unsold merchandise will become part of ending
inventory.

15. The transaction cost in relation to returned merchandise will become part of operating
expense.

1|P a g e RFERRER/RLACO/ATANG/DEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

PROBLEM SOLVING

Use the following information for the next two questions:

1. On January 1, 2031, Entity AAA entered into a consignment arrangement with Entity BBB.
The consignment arrangement provides that Entity BBB is entitled to 5% commission
based on sales. Entity AAA manufactured 100 boxes of product at manufacturing cost of
P200,000 On July 1, 2031, Entity A shipped through a common carrier 30 boxes of
consigned goods to Entity BBB. The common carrier collected the freight amounting to
P3,000 from Entity BBB. For the year ended December 31, 2031, Entity BBB sold on cash
20 boxes of consigned goods to final consumers at Entity A's predetermined price of
P3,000 per box. What is the net income to be reported by Entity AAA for the period ended
December 31, 2031?
a. P15,000
b. P18,000
c. P16,400
d. P17,000

2. Using the same data in preceding number, what is the net remittance to be made by Entity
BBB to Entity AAA as of December 31, 2031?
a. P60,000
b. P57,000
c. P63,000
d. P54,000

Use the following information for the next two questions:

On December 1, 2030, XOXO Inc. delivered 10 boxes of Monay bread and 10 packs of sample
bread, for tasting-purposes, to Aling Puring retail store on a consignment arrangement. The retail
store does not take title to the products and has no obligation to pay XOXO Inc. until they are sold
to the final customers. Any unsold products, excluding those that are lost or damages, can be
returned to XOXO Inc. and the latter has discretion to call products back or transfer products to
another customer.

XOXO manufactures the product at a cost of P5,000 per box of Monay bread and P100 per pack
of sample bread. There is freight collect of P2,000 for the delivery of 10 boxes of Monay bread to
Aling Puring but none for the sample bread. The selling price of the Monay product is P8,000 per
box for cash sales and P10,000 per box for credit sales with a term of 2/10 n/30. The retail store
is entitled to a 5% commission on cash sales and 10% commission on net credit sales already
collected. The retail store has the right to be reimbursed for the freight it incurred for its delivery
to final customers. XOXO Inc. provides bad debt expense at an estimate of 8% based on ending
receivables.

For the month ended December 31, 2030, Aling Puring retail store was able to sell to final
consumers 3 boxes of Monay bread on cash basis and 5 boxes of Monay bread on account.
There is freight prepaid of P3,000 for the delivery of boxes of Monay bread to final consumers.
Also, five packs of sample bread were consumed by final customers during the tasting period.
The customers on account paid to Aling Puring three out of five boxes sold on credit within the
discount period but the remainder continued to be unpaid as of December 31, 2030. At December
31, 2030, Aling Puring Retail Store made its net remittance to XOXO Inc.

3. Under IFRS 15, what is XOXO’s (3) net income for 2030 in connection with the
consignment arraignment?
a. P22,560
b. P21,240
c. P20,520
d. P23,420

4. Under IFRS 15, what is (4) net remittance to XOXO on December 31, 2030, respectively?
a. P44,260
b. P45,320
c. P41,140
d. PP42,240

2|P a g e RFERRER/RLACO/ATANG/DEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Use the following information for the next question

On November 30, 2029, FFF Co. consigned 90 freezers to ZZZ Co. for sale at P1,600 each
and paid P1,200 in transportation costs. A report of sales was received on December 30, 2029
from ZZZ reporting the sale of 20 freezers, together with a remittance was net of the agreed
15% commission.

5. How much, and what month, should FFF recognize as consignment sales revenue?
November December
a. 0 32,000
b. 0 27,200
c. 144,000 0
d. 142,800 0

Use the following information for the next question

GGG, Inc. consigned ten one-horsepower air conditioning units to UUU Trading and paid
P2,000 for the freight out. The consignee is allowed a commission of 5% on sales. UUU
Trading submitted account sales on its transactions for the month of December 2029, as
follows:

Sales (6 units, including 12.5% gross P 72,000

profit)
Less: Advances to consignor P
10,000
Selling expenses 800
Installation and delivery 1,200
Commission 7,200 19,200
Net remittance P 52,800
6. How much was the net profit or loss of GGG, Inc. on the consignment?
a. 52,800 profit
b. 7,800 loss
c. 2,200 profit
d. 1,400 loss

3|P a g e RFERRER/RLACO/ATANG/DEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Use the following information for the next two questions

BBB Manufacturing Co. consigned to OOO Trading Corp. twelve (12) Sony colored TV sets
which cost P9,000 each. Freight out was paid by the consignor in the amount of P600. OOO
Trading sold eight (8) sets, rendered an account sales, and remitted the amount of P82,600
after deducting the following from the selling price of the sets sold:
Commission on selling price 12%
Selling expenses P 1,200
Cost of antennae given free 1,400
Delivery and installation 2,800

7. The total selling price of the eight (8) sets sold by OOO Trading Corp. is:
a. 100,000
b. 88,000
c. 98,560
d. 78,571.43

8. The net profit of BBB Manufacturing Co. on the eight (8) sets sold by OOO Trading Corp.
is:
a. 40.00
b. 9,332.80
c. 10,200.00
d. 10,600.00

Use the following information for the next two questions

XXX Works Mfg. Co., consigned 5 dozens of XXX chairs to AAA Furniture Co. on April 1,
2029. Each chair cost P120 and the consignor paid P600 for the shipment to the consignee.
On August 15, 2029, 36 chairs were already sold and the consignee rendered an account
sales, and remitted the balance due the consignor in the amount of P5,580 after deducting
the following:

Commission at 15% of the selling price

Selling expenses P 360
Delivery and installation 180

9. How much is the profit on consignment?

a. 660
b. 900
c. 1,000
d. 1,260

10. The cost of the inventory on consignment in the hands of AAA Furniture Co. is:
a. 2,880
b. 3,120
c. 3,480
d. 4,320

4|P a g e RFERRER/RLACO/ATANG/DEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Use the following information for the next question

On December 1, 2029, WWW Department Store received 505 sweaters on consignment from
MMM. MMM’s cos t for the sweaters was P80 each, and they were priced to sell at P100. WWW’s
commission on consigned goods is 10%. At December 31, 2029, five sweaters remained.

11. In its December 31, 2029 balance sheet, what amount should WWW report as payable for
consigned goods?
a.
49,000
b. 45,400
c. 45,000
d. 40,400

Use the following information for the next question

In September 2029, KKK Books Store consigned 3,200 books, costing P60 and retailing for
P100 each to JJJ Store, debiting Accounts Receivable and crediting Sales for the retail sales
price. Freight cost of P3,200 was debited to Freight Expenses by the consignor. On
September 30, 2029, KKK Books Store received from JJJ Store the amount of P142,020 in
full settlement of the balance due, and Accounts Receivable was credited for this amount. The
consignor deducted a commission of P20 for each book sold, P180 for delivery expenses and
P200 for advertising expense.

12. How many books were actually sold by JJJ Store?

a. 1,424
b. 1,780
c. 2.064
d. 3,200

Use the following information for the next three questions

On January 1, 2025, Entity A entered into a consignment arrangement with Entity B. The
consignment arrangement provides that Entity B is entitled to 5% commission based on sales.
Entity A manufactured 100 boxes of product at manufacturing cost of P200,000 On July 1, 2025,
Entity A shipped through a common carrier 30 boxes of consigned goods to Entity B. The common
carrier collected the freight amounting to P3,000 from Entity B. For the year ended December 31,
2025, Entity B sold on cash 20 boxes of consigned goods to final consumers at Entity A's
predetermined price of P3,000 per box.

13. What is the net income to be reported by Entity A for the period ended December 31,
2025?

14. Using the same data in preceding number, what is the net remittance to be made by
Entity B to Entity A as of December 31, 2025?

Use the following information for the next three questions

In 2025, ABC Co. shipped 10 units of washing machine to a XYZ Co., a retailer, on consignment.
The goods cost P15,000 each and are to be sold at 40% above cost of merchandise excluding
directly attributable costs/additional capitalizable costs. ABC Co. paid freight of P7,500 to ship
the goods to XYZ Co. In addition, ABC Co. also paid insurance, handling and cartage fee relating
to the shipment totaling P2,500.

During the year, XYZ Co. spent P1,000 for local advertising and was able to sell 6 units of the
consigned goods. XYZ Co. also paid P6,000 for delivery and installation of the goods to the
customers. A unit with a minor defect was returned to ABC Co. and P1,500 was paid by XYZ Co.
for freight to ship the returned goods.

Both parties agreed that XYZ Co. is to receive 15% of the total sales as commission and be
reimbursed for all the payments made that are chargeable to ABC Co.

15. How much should be reported by ABC Co. as inventory out on consignment?
16. How much is the cash remittance of XYZ Co. to ABC Co.?
17. How much is the net income related to this consignment sales?

5|P a g e RFERRER/RLACO/ATANG/DEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Use the following information for the next three questions

On January 1, 2025, DEF Co. shipped 50 units of goods costing P10,000 each on consignment
basis to XYZ Co. to be sold at P15,000 each. The agreement provides that the consignee is to
be provided 10% commission. Furthermore, it was also agreed that the consignee will advance
50% of the cost of the oven which is to be applied to periodic remittances in proportion to the units
sold. Any expense incurred by the consignor related to the consigned goods are also deductible
from the remittance. DEF Co. incurred P5,000 in shipping these goods to the consignee.

On March 31, 2025, the consignee reported sales with the following expenses: advertising
P1,500; delivery expenses to customers of P200 per unit; commission of P30,000. The remittance
of cash was made on the same date.

18. How much should be reported by DEF Co. as inventory out on consignment?
19. How much was the remittance received by DEF Co.?
20. How much is the net income related in the consignment sales?

Use the following information for the next three questions

GHI Co. consigned 700 units of goods costing P700 each to XYZ Co. to be sold to customers at
P1, 000 per unit. The tenor of the contract states that XYZ Co. is entitled to a 20% commission
on units sold and reimbursement of any expense paid in relation to the contract. GHI Co. paid
P14, 000 worth freight and P3, 500 insurance for the shipment. At the end of the month, XYZ Co.
reported 195 units are still on hand. XYZ Co. remitted the available cash to GHI after deducting
commission of P100, 000 and advertising cost of P18, 000.

21. How many units were sold by XYZ Co.?

22. How much was the remittance received by GHI Co.?
23. How much is the net income related to this consignment sales?

-END-

6|P a g e RFERRER/RLACO/ATANG/DEJESUS