CONSIGNMENT SALES
Part I: Theory of Accounts
1. Under IFRS 15, what is the specific point in time when the consignor satisfies is performance
obligation under consignment contract?
A. Upon delivery of consigned goods by consignor to consignee
B. Upon remittance of cash by consignee to consignor
C. Upon sale of consigned goods by consignee to final consumers
D. Upon signing of contract of consignment by consignor and consignee
2. Under IFRS 15, how does a consignor satisfy its performance obligation under consignment contract?
A. Satisfaction over a period a period of time
B. Satisfaction at a specific point in time
C. Either A or B
D. Neither A nor B
3. When the consignor ships merchandise out for consignment to the consignee, in the books of the
consignee, it involves a
A. Debit to Consignment Inventory account
B. Debit to Merchandise Inventory account
C. Credit to Consignor Payable account
D. Memo entry
4. Which of the following is considered capitalizable or inventoriable cost?
A. Commission
B. Advertising
C. Freight from the consignor to consignee
D. Freight from the consignee to consignor
5. When the consignee pays expenses which is reimbursible on behalf of the consignor, in the books of
the consignor it involves a
A. Debit to Consignor Receivable account
B. Credit to Cash
C. Credit to Consignment Inventory account
D. Credit to Consignee Payable account
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Part II: Problem Solving
On December 1, 2024, ABC Inc. delivered 10 boxes of bread and 10 packs of sample bread, for tasting-
purposes, to XYZ retail store on a consignment arrangement. The retail store does not take title to the
products and has no obligation to pay ABC Inc. until they are sold to the final customers. Any unsold
products, excluding those that are lost or damages, can be returned to ABC Inc. and the latter has
discretion to call products back or transfer products to another customer.
ABC manufactures the product at a cost of P5,000 per box of bread and P100 per pack of sample bread.
There is freight collect of P2,000 for the delivery of 10 boxes of bread to XYZ but none for the sample
bread. The selling price of the 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 15% commission on cash sales and 10%
commission on credit sales. The retail store has the right to be reimbursed for the freight it incurred for its
delivery to final customers. ABC Inc. provides bad debt expense at an estimate of 8% based on ending
receivables.
For the month ended December 31, 2024, XYZ retail store was able to sell to final consumers 3 boxes of
bread on cash basis and 5 boxes of bread on account. There is freight prepaid of P3,000 for the delivery
of boxes of 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 XYZ three out of five boxes sold on credit
within the discount period but the remainder continued to be unpaid as of December 31, 2024. At
December 31, 2024, XYZ Retail Store made its net remittance to ABC Inc.
1. Under PFRS 15, what is ABC’s net income for 2024 in connection with the consignment
arrangement?
A. 22,560
B. 21,240
C. 20,560
D. 18,100
2. Under PFRS 15, what is XYZ’s net remittance to ABC on December 31, 2024?
A. 44,260
B. 39,800
C. 41,140
D. 42,240
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