Question

Recording Revenue and Receivables Under a Consignment Arrangement On March 15, 2020, Drexel Corp. provides goods to a retailer through consignment where Drexel Corp. retains ownership of the goods until the goods are sold to the retailer's customer. Sale to the final customer is documented when the goods are scanned at the cash register of the retailer. Drexel Corp. receives a daily report on the number of units sold by the retailer to the end customer. Any unsold product can be returned to Drexel Corp. at anytime. Drexel Corp. has the right through the contract to recall any goods shipped and to transfer the goods to another retailer as a way to increase the rate of sales to the final customer. After the sale of the products to the final customer, the retailer cannot return the items to Drexel Corp. During March of 2020, Drexel Corp. transferred 2,400 units to the retailer, and the retailer sold 2,000 units. The product cost Drexel Corp. $80 per unit and the product was sold for $115 per unit to the end customer. The retailer sent a payment to Drexel Corp. for the cash collected on the sale of product less a 10% commission on April 7, 2020. Support

Answer 1

a) Drexel corporation should recognise revenue when the goods are sold to the retailer's customer (sale of product to end consumer )

b) Drexel's entries

Date	Particular	Debit	Credit
Mar-15	Inventory on consignment (2400*80)	192000
	To inventory on hand		192000
	(being Inventory transferred )
Mar-31	Receivable from Retailer	230000
	To sales (2000*115)		230000
	( To record the sale of product )
Mar-31	Cost of goods sold	160000
	To Inventory on consignment (2000*80)	160000
	(To record the cost of sale of product)
Apr-07	Cash A/c	207000
	Commission to retailer(230000*10%)	23000
	To Receivable from Retailer		230000
	(To record the payment received from
	retailer less commission)