Consignee does not record the goods as an asset On Brooks Brothers

Consignee does not record the goods as an asset on

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Consignee does not record the goods as an asset
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On May 19, 2017, Brooks Brothers Corp (BB) ships 30,000 of merchandise to Tom Corp on consignment. BB pays the $2,500 cash for shipping. On May 20, 2017, Tom Corp pays $4,000 for advertising and is reimbursable by BB. Tom Corp does not notify BB of the advertising expenses until June 1. Tom Corp charges a 15% commission based on the selling price of the merchandise. On June 1, Tom Corp sells half of the merchandise for $25,000 cash, notifies BB of the sale, and remits the cash to BB. What are the journal entries recorded by BB Corp and Tom Corp? Sales on Consignment 19/5/17 NO JOURNAL ENTRY Ad Exp Receivable from BB 4,000 Cash 4,000 1/6/17 Cash 25,000 Commission Revenue 3,750 Journal Entries – Tom Corp 20/5/17 Ad Exp Receivable from BB 4,000 Payable to BB 17,250 Payable to BB 17,250 Cash 17,250 Tom Corp
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On May 19, 2017, Brooks Brothers Corp (BB) ships 30,000 of merchandise to Tom Corp on consignment. BB pays the $2,500 cash for shipping. On May 20, 2017, Tom Corp pays $4,000 for advertising and is reimbursable by BB. Tom Corp does not notify BB of the advertising expenses until June 1. Tom Corp charges a 15% commission based on the selling price of the merchandise. On June 1, Tom Corp sells half of the merchandise for $25,000 cash, notifies BB of the sale, and remits the cash to BB. What are the journal entries recorded by BB Corp and Tom Corp? Sales on Consignment Brooks Brothers Corp 19/5/17 NO ENTRY 1/6/17 Cash 17,250 Advertising Expense 4,000 Journal Entries – Brooks Brothers Corp 20/5/17 Consignment Sale Revenue 25,000 Inventory – Consigned 30,000 Finished Goods Inventory 30,000 Inventory – Consigned 2,500 Cash 2,500 If BB could form an estimate and knows about the dates of the advertising services, BB could record a journal entry here. Commission Expense 3,750 Inventory – Consigned 16,250 Cost of Goods Sold 16,250
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Warranties Two types of warranties to customers: 1. Product meets agreed-upon specifications in contract at time product is sold. Warranty is included in sales price assurance-type warranty 2. Not included in sales price of product Recorded as a separate performance obligation service-type warranty
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Assurance-Type Warranty Companies often provide one of two types of warranties to customers: (1) Assurance-Type and (2) Service-Type Warranty Assurance-Type Warranty A quality guarantee that the good or service is free from defects at the point of sale. Obligations should be expensed in the period the goods are provided or services performed (in other words, at the point of sale). Company should record a warranty liability.
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Assurance-Type Warranty Illustration: Denson Machinery Company begins production of a new machine in July 2015 and sells 100 of these machines for $5,000 cash by year-end. Each machine is under warranty for one year. Denson estimates, based on past experience with similar machines, that the warranty cost will average $200 per unit. Further, as a result of parts replacements and services performed in compliance with machinery warranties, it incurs $4,000 in warranty costs in 2015 and $16,000 in 2016.
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  • Winter '18
  • jane smith

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