Recording Revenue and Receivables Under a Consignment Arrangement On March 15, 2020, Drexel Corp. provides goods to a retailer through consignment where Drexel Corp. retains ownership of the goods until the goods are sold to the retailer’s customer. Sale to the final customer is documented when the goods are scanned at the cash register of the retailer. Drexel Corp. receives a daily report on the number of units sold by the retailer to the end customer. Any unsold product can be returned to Drexel Corp. at anytime. Drexel Corp. has the right through the contract to recall any goods shipped and to transfer the goods to another retailer as a way to increase the rate of sales to the final customer. After the sale of the products to the final customer, the retailer cannot return the items to Drexel Corp. During March of 2020, Drexel Corp. transferred 2,400 units to the retailer, and the retailer sold 2,000 units. The product cost Drexel Corp. $80 per unit and the product was sold for $115 per unit to the end customer. The retailer sent a payment to Drexel Corp. for the cash collected on the sale of product less a 10% commission on April 7, 2020. a. At what point should Drexel Corp. recognize revenue?
Recording Revenue and Receivables Under a Consignment Arrangement
On March 15, 2020, Drexel Corp. provides goods to a retailer through consignment where Drexel Corp. retains ownership of the goods until the goods are sold to the retailer’s customer. Sale to the final customer is documented when the goods are scanned at the cash register of the retailer. Drexel Corp. receives a daily report on the number of units sold by the retailer to the end customer. Any unsold product can be returned to Drexel Corp. at anytime. Drexel Corp. has the right through the contract to recall any goods shipped and to transfer the goods to another retailer as a way to increase the rate of sales to the final customer. After the sale of the products to the final customer, the retailer cannot return the items to Drexel Corp. During March of 2020, Drexel Corp. transferred 2,400 units to the retailer, and the retailer sold 2,000 units. The product cost Drexel Corp. $80 per unit and the product was sold for $115 per unit to the end customer. The retailer sent a payment to Drexel Corp. for the cash collected on the sale of product less a 10% commission on April 7, 2020.
a. At what point should Drexel Corp. recognize revenue?
Answer
b. Record Drexel’s entries on March 15, 2020, March 31, 2020, and April 7, 2020.
Note: If a
| Date | Account Name | Dr. | Cr. |
|---|---|---|---|
| Mar 15, 2020 | Answer |
| Answer | Answer |
| Answer |
| Answer | Answer | ||
| Mar 31, 2020 | Due from Consignee | Answer | Answer |
| Answer |
| Answer | Answer |
| Answer |
| Answer | Answer | ||
| To record the sale of product. | |||
| Answer |
| Answer | Answer |
| Answer |
| Answer | Answer | ||
| To record the cost of sale of product. | |||
| April 7, 2020 | Answer |
| Answer | Answer |
| Answer |
| Answer | Answer |
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