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Consignment sales

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Consignment sales

  • This topic has 12 replies, 2 voices, and was last updated 10 years ago by MikeLittle.
Viewing 13 posts - 1 through 13 (of 13 total)
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  • April 20, 2015 at 2:26 pm #241929
    Aloyce
    Member
    • Topics: 10
    • Replies: 30
    • ☆

    Hope all is well Sir.

    Could you help with this, how do we account ??

    Rain Co sells goods amounting to $ 2.5 m on a consignment basis to Gain Co. During the year, Gain co sold goods amounting to $ 1.5m to dealers.

    Journalize.
    Case 1: In consignor’s Books
    Case 2: In consignee’s books

    April 20, 2015 at 3:26 pm #241933
    Aloyce
    Member
    • Topics: 10
    • Replies: 30
    • ☆

    As per Revenue Standard IAS 18

    April 20, 2015 at 4:39 pm #241942
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23303
    • ☆☆☆☆☆

    When the $2.5m go to the consignee, are these at invoice value or at cost to the consignor?

    And when the consignee sells them, is $1.5m the amount received by the consignee or does the consignee add a further element of profit?

    Let’s go with these assumptions – the $2.5m is the normal selling price to the outside World and the consignee is therefore effectively merely a stockholder / agent waiting to move goods on on behalf of the consignor.

    So the $1.5m is simply 60% of the goods received from consignor

    Now, next point – you will not be asked to show the accounting entries for consignment sales – neither for the consignor nor for the consignee!

    The only thing that you need to know for F7 (and for P2 too) is that goods sent on consignment are not to be classed as revenue until the consignee contacts the consignor and says “You know those goods you sent me? I’ve sold 60% of them for $1.5m :-). What do you want me to do?”

    The consignor says “Send me the money and try to sell the rest”

    Dr Consignee 1.5m
    Cr Revenue 1.5m

    Profit will be affected because the profit element in the remaining 1m is unrealised (if the goods we sent to the consignee inclusive of a profit element) so closing inventory needs to include that 1m but at cost value rather than at invoice value

    Is that ok for you?

    April 20, 2015 at 5:04 pm #241952
    Aloyce
    Member
    • Topics: 10
    • Replies: 30
    • ☆

    Thanks i got you. I was trying to dig too deep .

    Sorry
    Another question, is the profit from the sale of non current assets, a revenue ??

    Thanks in advance

    April 20, 2015 at 8:58 pm #241974
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23303
    • ☆☆☆☆☆

    No, not revenue. It’s shown separately in the body of the statement of profit or loss

    April 25, 2015 at 7:43 am #242534
    Aloyce
    Member
    • Topics: 10
    • Replies: 30
    • ☆

    Sir,
    Could you help below questions

    1. Dividends received, interest received and royalties, are they part of revenue item in SOPL or other income ??

    2. Under operating lease, minimum lease payments are they part of revenue or other income ?? In the books of lessor

    3. Under finance lease, in the books of lessor- We start by derecognize the leased asset and then recognize at the lower of PV of min lease payments or Fair value. My question is, what if the amount we recognized is different from the carrying amount of an asset, Where do we account the difference ?? Eg Asset has carrying amount of $ 1.5m and the present value of min lease payments is $ 1.2m Or 1.6m

    4. What is logic behind of recognize at the lower of Fair value and Pv of min lease payments ?

    April 25, 2015 at 7:50 am #242537
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23303
    • ☆☆☆☆☆

    1 – all other income

    2 – if leasing is the main business of the lessor, then revenue. If leasing is incidental to the main business, then other income

    3 – impair by .3 and probably not revalue by .1

    4 – ask the IASB !!!

    Lessor accounting is not in the F7 syllabus!

    April 25, 2015 at 8:06 am #242539
    Aloyce
    Member
    • Topics: 10
    • Replies: 30
    • ☆

    I got you Sir.
    Thanks very much

    April 25, 2015 at 8:11 am #242541
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23303
    • ☆☆☆☆☆

    You’re welcome

    April 26, 2015 at 2:09 pm #242795
    Aloyce
    Member
    • Topics: 10
    • Replies: 30
    • ☆

    Sir, again
    Sorry

    How do we present Deferred credit income in SOFP ? Are we going to separate into Non current and current liability ?

    Also, are Non current assets held for sale, remaining in Non current heading in SOFP ??

    Thanks

    April 26, 2015 at 2:22 pm #242798
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23303
    • ☆☆☆☆☆

    Yes, split into current and non-current

    Current assets for the AHFS

    April 26, 2015 at 3:19 pm #242807
    Aloyce
    Member
    • Topics: 10
    • Replies: 30
    • ☆

    Thanks

    April 26, 2015 at 3:27 pm #242812
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23303
    • ☆☆☆☆☆

    You’re welcome

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