Tree top Products, Ltd. sells stuffed animals to local convenience stores and small pharmacy chains. All of Tree top sales are on consignment. The consignee receives a 15% commission for each product sold. Treetop completed the following consignment-related transactions.
Tree top Products, Ltd. sells stuffed animals to local convenience stores and small pharmacy chains. All of Tree top sales are on consignment. The consignee receives a 15% commission for each product sold. Treetop completed the following consignment-related transactions.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Tree top Products, Ltd. sells stuffed animals to local convenience stores and small pharmacy chains. All of Tree top sales are on consignment. The consignee receives a 15% commission for each product sold. Treetop completed the following consignment-related transactions.
|
Date
|
Transaction
|
Amount
|
|
February 2, 2024
|
Ships merchandise on consignment to Next Door Pharmacy.
|
Cost = $600,000
|
|
Retail Value = $2,000,000
|
||
|
May 15, 2024
|
Next Door Pharmacy sells 80% of the consigned inventory for cash.
|
$1,600,000
|
|
June 1, 2024
|
Next Door notifies Treetop about the sale and remits the cash collected to Treetop,
|
|
|
net of the 15% commission.
|
$1,600,000
|
|
|
January 3, 2025
|
Next Door sells the remainder of the consigned merchandise for cash.
|
$400,000
|
|
January 5, 2025
|
Next Door notifies Treetop and remits the cash collected net of the 15% commission.
|
$400,000
|
Let's begin our journal entries with the consignor (Treetop) entries.
February 2, 2024. Ships merchandise on consignment to Next Door Pharmacy.
May 15, 2024. Next Door Pharmacy sells 80% of the consigned inventory for cash.
June 1, 2024. Next Door Pharmacy notifies Treetop about the sale and remits the cash collected to Treetop, net of the 15% commission. Do not enter the cost of inventory transaction. We will do that in the next step.
February 2, 2024. Ships merchandise on consignment to Next Door Pharmacy.
May 15, 2024. Next Door Pharmacy sells 80% of the consigned inventory for cash.
June 1, 2024. Next Door Pharmacy notifies Treetop about the sale and remits the cash collected to Treetop, net of the 15% commission. Do not enter the cost of inventory transaction. We will do that in the next step.
Now, enter the cost of inventory associated with the sale on June 1.
January 3, 2025. Next Door sells the remainder of the consigned merchandise for cash.
January 5, 2025. Next Door notifies Treetop and remits the cash collected net of the 15% commission. Do not enter the cost of inventory transaction. We will do that in the next step.
Now, enter the cost of inventory associated with the sale on January 5.
Next, we will shift our perspective and prepare the journal entries for the cosignee
(Next Door).
February 2, 2024. Ships merchandise on consignment to Next Door Pharmacy
May 15, 2024.Next Door Pharmacy sells 80% of the consigned inventory for cash
June 1, 2024. Next Door Pharmacy notifies Treetop about the sale and remits the cash collected to Treetop, net of the 15% commission.
Prepare Next Door's journal entry, if any, to record the cost of sales.
January 3, 2025. Next Door sells the remainder of the consigned merchandise for cash.
January 5, 2025. Next Door notifies Treetop and remits the cash collected net of the 15% commission.
Prepare Next Door's journal entry, if any, to record the cost of sales.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education