Question

On Sept. 1, Jones Metal Corp. consigned 50 handcrafted benches to Hisco Co. Jones Metal’s cost was $350 per bench. Total freight costs were $700, which were paid by Hisco. On Jan. 1, Heavy Metal received a cheque for $14,100 from Hisco which included the following information:

Number of units sold: 20

Expenses deducted:

Freight: $700

Commission (20% of sales price) ?

Advertising $450

Delivery $290

a) Under the earnings approach, what were the total sales?

b) On whose statement of financial position and at what amount will the inventory of benches be reported?

Answer 1

(a) -- Under the earnings approach, what were the total sales?

Answer -

Particulars	Calculations	Amount ($)
Cheque received from Hisco Co.	Given in question	14100
Freight	Given in question	700
Advertising	Given in question	450
Delivery	Given in question	290
Commission (20% of sales price)	= {[($14100+$700+$450+$290)/80] * 100 } * 20% = [($15540/80) * 100] * 20% = $19425 * 20% = $3885	3885
Total Sales	($14100+$700+$450+$290+$3885)	19425

.

(b) -- On whose statement of financial position and at what amount will the inventory of benches be reported?

Answer -

In Jones Metal's Statement of Financial Position, Inventory of benches be reported = $10920.

Particulars	Calculations	Amount ($)
Benches at Cost	[30 units * $350 per unit]	10500
Freight costs	[($700/50 units) * 30 units]	420
Inventory of benches be reported	[$10500+$420]	10920