Jansen Corporation shipped $21,300 of merchandise on consignment to Gooch Compan

Question

Jansen Corporation shipped $21,300 of merchandise on consignment to Gooch Company. Jansen paid freight costs of $1,980. Gooch Company paid $530 for local advertising, which is reimbursable from Jansen. By year-end, 57% of the merchandise had been sold for $20,500. Gooch notified Jansen, retained a 10% commission, and remitted the cash due to Jansen.

Prepare Jansen’s entry when the cash is received. (Round answers to 0 decimal places, e.g. 1,525. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

(To record the cash remitted to Jansen.)

(To record the cost of inventory sold on consignment.)

Account Titles and Explanation

Debit

Credit

(To record the cash remitted to Jansen.)

(To record the cost of inventory sold on consignment.)

Explanation / Answer

When cash is received:

Cash a/c Dr $ 18920

Advertising expenses a/c Dr $ 530

Commission Expenses a/c Dr $2050

Revenue from consignment a/c $ 20500

(being cash received by Jansen after reimbursing advertisement expenses and 10% comission on sales by Gooch company)

Cost of Good sold( 57%X(21300+1980(freigt cost)) $13270

Consignment Inventory a/c $13270

(being inventory cost transferred to COGS, the cost includes purchase price and freight cost)

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