POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

PRACTICAL ACCOUNTING 2
2013-2014

CONSIGNMENT SALES / CORPORATE LIQUIDATION

P2 - 104
CONSIGNMENT SALES

Problem 1. Paul, Inc., agrees to transfer television sets to Walker Bros. on a consignment basis. The consignee is to
sell a set at 40% above cost exclusive of freight and is to receive a 10% commission on sales price. The consignor
agrees to reimburse the consignee for all expenses related to the consignment. The agreement also calls for an
advance payment by the consignee of 30% per set based on selling price; the said advance is to be deducted as
settlement is made for each set sold. The consignee is to provide an account sales quarterly and is to make cash
remittance for the amount owed at that time. The following consignment sales activities occurred during the October 1
to December 31 of current year:

Sets shipped – 100; Unit cost each set – P 10,000; Freight charges on the shipment paid by the consignor – P
75,000; The consignee made advance payments on the sets received; Advertising cost paid by the consignee – P
50,000

The consignee sold 80 sets for cash; expenses of delivery and installation were P 25,000. After notifying the
consignor with the total sets sold for the period, the consignee returned 10 sets representing a model that could not
be sold and paid freight charges of P 8,000 on the return.

Determine the following:

1. The amount remitted by the consignee.
a. P 933,000 b. P 709,000 c. P 701,000 d. P 547,000

2. The value of the remaining 20 sets of inventory unsold.

a. P 200,000 b. P 223,000 c. P 215,500 d. P 207,500

3. Net income by the consignor as a result of the above transactions.

a. P 57,500 b. P 73,000 c. P 125,000 d. P 133,000

Problem 2. GEL Company consigned 10 refrigerators to MARK Sales Company. Each refrigerator cost P12,000. The
freight on the shipment amounting to P500 each was paid by GEL. Western Sales Company returned 1 unit to GEL in
good condition (wrong unit delivered). MARK Sales Company paid P200 for the shipment of the returned unit. MARK
Sales Company reported that only 8 units were sold at a price that yield 25% gross profit rate. MARK Sales Company
remitted the amount due to GEL Company after deducting 20% commission and freight of the returned units.

Questions:
1. The amount remitted by MARK Sales Company amounted to:

a. P 102,400 b. P 128,000 c. P 102,200 d. P 122,250

2. The net profit to be recognized by GEL Company on the above consignment amounted to:

a. P 1,700 b. P 1,500 c. P 2,200 d. P 2,300

Problem 3. In consignment sales, the consignor may prefer the consignment of goods to dealers over direct sale for
the following reasons, except
a. The consignment may be the only way in which a wider marketing area can be secured by a producer,
manufacturer, or distributor.
b. Selling specialists may be obtained by the consignor, particularly for sale of grain, livestock, and produce.

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 c. The consignor can recover unsold goods or the proceeds from sales from the consignee even though the,
latter becomes insolvent or bankrupt.
d. The risks of physical deterioration as well as price fluctuation are avoided.

COORPORATE LIQUIDATION
Problem 1. The following data were taken from the statement of realization and liquidation of Anne Company for the
quarter ended September 30, 2013:
Liabilities to be liquidated P1,425,000

Supplementary charges 845,500

Liabilities not liquidated 1,050,000

Supplementary credits 962,500

Assets acquired 680,000

Liabilities liquidated 790,000

Assets to be realized 537,500

Assets realized 875,000

Liabilities assumed 415,000

The beginning balances of ordinary shares and retained earnings are P510,000 and P148,000, respectively. The net
income for the period is P437,000. How much is the ending cash balance?
a. P1,545,500 b. P1,482,500 c. P1,045,500 d.
P1,465,000

Problem 2. The following information are related to John Loyd Corporation which is undergoing liquidation:

a. Bonds payable amounting to P73,600 is secured by merchandise inventory with book value of P123,000 and net
realizable value of 2/3 of recorded amount.
b. Of the P195,600 accounts payable, P55,000 is secured by equipment with carrying amount of P76,800 which is
70% realizable.
c. Building with carrying amount of P129,000 has a net realizable value of P99,000.
d. Other unrecorded liabilities are accrued interest on bonds, P3,100; salaries payable, P17,400; taxes payable,
P11,600 and trustee’s fee, P8,500.
e. Cash available prior to liquidation amounts to P11,900.
f. Total assets of John Loyd Corporation presented in the Statement of Financial Position prior to liquidation
amounts to P480,000. Remaining assets other than those whose realizable value were mentioned above have
NRV of 60% of recorded amount, except for prepaid expenses and goodwill amounting to P7,600 and P22,000,
respectively
g. Total liabilities of the company prior to liquidation amounts to P380,000.

Compute for the estimated deficiency to unsecured liabilities.

a. P108,120 b. P120,020 c. P90,360 d.
P67,520

Problem 3. Prive’ Company has been undergoing liquidation since January 1. As of June 30, its condensed
Statement of Realization & Liquidation is presented below:

Assets realized P105,000 Sales on account P17,500

Interest on investment 525 Assets not realized 147,000
Purchases 6,250 Liabilities not liquidated 111,475
Assets acquired 17,500 Sales for cash 87,500
Liabilities assumed 5,250 Assets to be realized 332,500
Payment of expenses of trustee 26,250 Liabilities liquidated 122,500
Liabilities to be liquidated 227,500

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The net gain (loss) on realization and liquidation is
a. P61,250 b. (P61,250) c. P26,200
d. (P26,200)
Problem 4. The following information was taken from the Statement of Affairs of CAPITOL Corp.

Assets pledged to fully secured liabilities (fair value of P375,000) P450,000

Assets pledged to partially secured liabilities (fair value of P260,000)
370,000
Free assets (current fair value of P200,000)
350,000
Fully secured liabilities 150,000
Partially secured liabilities
300,000
Unsecured liabilities with priority 35,000
Unsecured liabilities without priority 560,000

The amount to be paid to partially secured creditors is

a. P285,000 b. P281,000 c. P286,000 d.
P263,50

Problem 5. The following data were taken from Statement of Affairs of PACman Company:
Shareholders’ equity 441,000

Bonds payable without security 735,000

Salaries 50,000

Loss on assets realization 551,250

Accounts payable without security 367,500

Taxes 72,500

Trustee expenses 55,125

How much is the total free assets?

a. P992,250 b. P953,575 c. P1,114,750 d.
P1,059,625

Problem 6. The following data were taken from the Statement of Affairs of Henares Company:

Assets pledged to fully secured liabilities 218,750

Assets pledged to partially secured liabilities
157,500
Free assets 152,250
Fully secured liabilities 175,000
Partially secured liabilities
192,500
Unsecured liabilities with priority 22,750
Unsecured liabilities without priority 157,500

Which of the following is correct?

a. Fully secured liabilities; estimated amount to be received is P218,750
b. Partially secured liabilities; estimated amount to be received is P192,500
c. Unsecured liabilities with priority; estimated amount to be received is P20,475
d. Unsecured liabilities without priority; estimated amount to be received is P141,750

Problem 7. Fast & Furious Inc. is insolvent and its statement of affairs show: Estimated gain on realization of assets,
P2,000,000; Estimated loss on realization of assets, 2,560,000; Additional assets, P1,280,000; Additional liabilities,
P960,000; Capital Stock, P12,000,000; Deficit, P11,200,000.

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The pro-rata payment to stockholders on the peso is:
a. P0.70 b. P0.43 c. P0.30 d. P0.57

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