Question

Pronghorn Corporation shipped $20,800 of merchandise on consignment to Gooch Company. Pronghorn paid freight costs of $2,200. Gooch Company paid $550 for local advertising, which is reimbursable from Pronghorn. By year-end, 57% of the merchandise had been sold for $22,300. Gooch notified Pronghorn, retained a 10% commission, and remitted the cash due to Pronghorn.Prepare Pronghorn'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.)

Answer 1

Answer:

Date                 Account Title                                       Debit            Credit

Year end          Cash                                                 $19,520

                       Advertising expenses                          $550

                       Commission expenses                    $2,230

                       Revenue from Consignment                               $22,300

                      Cost of Goods sold                          $13,110

                      Inventory on Consignment                                   $13,110

Cash received by Pronghorn:

= Cash - Advertising - Commission

= 22,300 - 550 - (10% * 22,300)

= 22,300 - 550 - 2,230

= $19,520

Cost of Goods sold:

= 57% * (Value of goods + Shipping)

= 57% * (20,800 + 2,200)

= $13,110