G Limited operates a trading business. During the year ended 31 December 2021, G Limited appointed an overseas agent, Javeed, to sell goods on its behalf. G Limited shipped 300 units of inventory costing $115 each to Javeed. G Limited also paid freight charges of $7200. G Limited received a proforma statement from Javeed on 1 January 2022 as follows. $ 63500 4500 59000 Gross sales 254 units at $250 each Goods returned 18 units at $250 each Net sales Import duties Assistant's salary Transportation to warehouse Transportation to customers Advertising Commission 2100 4500 3600 6000 4800 Amount due to G Limited ? Defects had been found in the returned goods. In the agreement between G Limited and Javeed, it was stated that the commission earned by Javeed would be 8% of sales. Due to the uncertainty in the agreement, Javeed was not sure whether the commission should be based on gross sales or net sales.
G Limited operates a trading business. During the year ended 31 December 2021, G Limited appointed an overseas agent, Javeed, to sell goods on its behalf. G Limited shipped 300 units of inventory costing $115 each to Javeed. G Limited also paid freight charges of $7200. G Limited received a proforma statement from Javeed on 1 January 2022 as follows. $ 63500 4500 59000 Gross sales 254 units at $250 each Goods returned 18 units at $250 each Net sales Import duties Assistant's salary Transportation to warehouse Transportation to customers Advertising Commission 2100 4500 3600 6000 4800 Amount due to G Limited ? Defects had been found in the returned goods. In the agreement between G Limited and Javeed, it was stated that the commission earned by Javeed would be 8% of sales. Due to the uncertainty in the agreement, Javeed was not sure whether the commission should be based on gross sales or net sales.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question

Transcribed Image Text:G Limited operates a trading business. During the year ended 31 December 2021, G Limited appointed
an overseas agent, Javeed, to sell goods on its behalf. G Limited shipped 300 units of inventory costing
$115 each to Javeed. G Limited also paid freight charges of $7200.
G Limited received a proforma statement from Javeed on 1 January 2022 as follows.
$
63500
4500
59000
Gross sales 254 units at $250 each
Goods returned 18 units at $250 each
Net sales
Import duties
Assistant's salary
Transportation to warehouse
Transportation to customers
Advertising
Commission
2100
4500
3600
6000
4800
~-~-~~||
Amount due to G Limited
Defects had been found in the returned goods. In the agreement between G Limited and Javeed, it
was stated that the commission earned by Javeed would be 8% of sales. Due to the uncertainty in
the agreement, Javeed was not sure whether the commission should be based on gross sales or net
sales.

Transcribed Image Text:(a) Explain two reasons why Javeed should ask for commission based on gross sales.
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