CMA Intermediate · Financial Accounting · Consignment
Mehra Ltd. consigned 200 units costing Rs 500 each to Nair & Co., and paid Rs 10,000 freight. Nair sold 150 units at Rs 700 each, and paid Rs 3,000 selling expenses. Nair's commission is 5% on sales. What profit on consignment does Mehra record, with no abnormal loss?
Profit on consignment is Rs 14,250. Sales of Rs 1,05,000 plus closing stock of Rs 27,500 (50 units at Rs 550 including freight) give Rs 1,32,500. Deducting cost Rs 1,10,000, selling expenses Rs 3,000 and commission Rs 5,250 leaves Rs 14,250.
- ARs 14,250Correct
- BRs 12,250
- CRs 14,750
- DRs 17,250
Explanation
Sales = 150 x 700 = Rs 1,05,000. Cost incl. freight = 1,00,000 + 10,000 = Rs 1,10,000, so per unit is Rs 550, and closing stock = 50 x 550 = Rs 27,500. Commission = 5% of 1,05,000 = Rs 5,250. Profit = 1,05,000 + 27,500 - 1,10,000 - 3,000 - 5,250 = Rs 14,250.
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