Question

The following are transactions between Splish Brothers Corp., the consignor, and Sunland Stores Ltd., the consignee, for the month of June 2020. Splish Brothers uses a perpetual inventory system and has a separate perpetual record for inventory sent out on consignment. At the end of each month, sales are reported by Sunland to Splish Brothers and a net payment is made. The agreement stipulates that Sunland is to receive a 20% (of sales) commission and a 8% (of sales) rebate to offset its advertising expenses.

June	1		Splish Brothers Corp. ships merchandise costing $495,000 on consignment to Sunland Stores Ltd.
June	5		Splish Brothers pays the freight of $4,000 for the above shipment of June 1.
June	30		Summary entry for the month of June: Sunland sells half of the merchandise for $630,000 cash.
June	30		Sunland notifies Splish Brothers that 50% of the merchandise has been sold for $630,000 and remits a cheque for the amount due under the consignment agreement. Splish Brothers records the receipt of the cheque from Sunland

Prepare the journal entries necessary on the books of Splish Brothers Corp. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter Ofor the amounts. Record journal entries in the order presented in the problem.) Date Account Titles and Explanation Debit Credit (To record consignment sales) (To record cost of goods sold)

Answer 1

Journal entries in the books of Splish

Date	Account title and explanation	Debit	Credit
June 1	Inventory (consignments)	$495,000
	Finished Goods Inventory		$495,000
	[To record shipment of goods]
June 5	Inventory (consignments)	$3,750
	Cash		$3,750
	[To record payment for freight]
June 30	Cash	$453,600
	Advertising expense	$50,400
	Commission Expense	$126,000
	Revenue from Consignment Sales		$630,000
	[To record consignment sales
June 30	Cost of goods sold (495,000 x 50%)	$247,500
	Inventory (Consignment)		$247,500
	[To record cost of goods sold]

Journal entries in the books of Sunland:

Date	Account title and explanation	Debit	Credit
June 1	No Entry (record memo of merchandise received)
June 5	Receivable from consignor	$50,400
	Cash		$50,400
	[To record payment of advertising expenses]
June 5	Cash	$630,000
	Payable to Consignor		$630,000
	[To record sale of consigned merchandise)
June 30	Payable to Consignor	$630,000
	Receivable from consignor (630,000 x 8%)		$50,400
	Commission revenue (630,000 x 20%)		$126,000
	Cash		$453,600
	[To record remittance of amount due]