CMA Foundation · Fundamentals of Financial and Cost Accounting · Consignment
Ganga Mills consigned goods to an agent at an invoice price of ₹1,25,000, which is cost plus 25%. At the year end, the unsold stock with the agent is valued at invoice price of ₹30,000. What is the stock reserve to be created?
The stock reserve is ₹6,000. Because goods are invoiced at cost plus 25%, the loading is one-fifth, or 20%, of invoice price. Applying 20% to the ₹30,000 closing stock at invoice price gives ₹6,000. Using 25% on invoice price is the wrong base.
- A₹7,500
- B₹6,000Correct
- C₹24,000
- D₹30,000
Explanation
Loading is 25% on cost, so it equals 25/125 = 20% of invoice price. Stock reserve = 30,000 × 20% = ₹6,000. ₹7,500 wrongly applies 25% to the invoice-price stock.
Did you get it right without looking?
One question tells you little. A timed set on Consignment shows your real accuracy, how long you take and where you lose marks.
More Consignment questions
- Roy Enterprises consigns goods at cost plus 50%. Goods with an invoice price of ₹9,000 are lost abnormally in transit. At what amount should…
- A consignor sends goods costing Rs 60,000 to a consignee and spends Rs 4,000 on packing and forwarding. The consignee spends Rs 2,000 on god…
- Which of the following is an example of a normal loss on consignment that is NOT separately charged to the Consignment Account as a loss but…
- In a consignment arrangement, who continues to own the goods while they are lying with the consignee?
- Kaveri Ltd invoices consignment goods at 20% above cost. At the year end, unsold stock with the consignee is valued at invoice price of ₹48,…
- Nair Brothers invoices goods to the consignee at ₹150 per unit against a cost of ₹120 per unit. 40 units are lost in transit through an abno…