Answered: Tree top Products, Ltd. sells stuffed…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter6: Merchandising Transactions

Section: Chapter Questions

Problem 2PB: Record journal entries for the following transactions of Mason Suppliers. A. Sep. 8: Purchased 50...

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Tree top Products, Ltd. sells stuffed animals to local convenience stores and small pharmacy chains. All of Tree top sales are on consignment. The consignee receives a 15% commission for each product sold. Treetop completed the following consignment-related transactions.

Date	Transaction	Amount
February 2, 2024	Ships merchandise on consignment to Next Door Pharmacy.	Cost = $600,000
		Retail Value = $2,000,000
May 15, 2024	Next Door Pharmacy sells 80% of the consigned inventory for cash.	$1,600,000
June 1, 2024	Next Door notifies Treetop about the sale and remits the cash collected to Treetop,
	net of the 15% commission.	$1,600,000
January 3, 2025	Next Door sells the remainder of the consigned merchandise for cash.	$400,000
January 5, 2025	Next Door notifies Treetop and remits the cash collected net of the 15% commission.	$400,000

Let's begin our journal entries with the consignor (Treetop) entries.

February 2, 2024. Ships merchandise on consignment to Next Door Pharmacy.

May 15, 2024. Next Door Pharmacy sells 80% of the consigned inventory for cash.

June 1, 2024. Next Door Pharmacy notifies Treetop about the sale and remits the cash collected to Treetop, net of the 15% commission. Do not enter the cost of inventory transaction. We will do that in the next step.

Now, enter the cost of inventory associated with the sale on June 1.

January 3, 2025. Next Door sells the remainder of the consigned merchandise for cash.

January 5, 2025. Next Door notifies Treetop and remits the cash collected net of the 15% commission. Do not enter the cost of inventory transaction. We will do that in the next step.

Now, enter the cost of inventory associated with the sale on January 5.

Next, we will shift our perspective and prepare the journal entries for the cosignee

(Next Door).

February 2, 2024. Ships merchandise on consignment to Next Door Pharmacy

May 15, 2024.Next Door Pharmacy sells 80% of the consigned inventory for cash

June 1, 2024. Next Door Pharmacy notifies Treetop about the sale and remits the cash collected to Treetop, net of the 15% commission.

Prepare Next Door's journal entry, if any, to record the cost of sales.

January 3, 2025. Next Door sells the remainder of the consigned merchandise for cash.

January 5, 2025. Next Door notifies Treetop and remits the cash collected net of the 15% commission.

Prepare Next Door's journal entry, if any, to record the cost of sales.

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Tree top ​Products, Ltd. sells stuffed animals to local convenience stores and small pharmacy chains. All of Tree top sales are on consignment. The consignee receives a ​15% commission for each product sold. Treetop completed the following​ consignment-related transactions.

Tree top Products, Ltd. sells stuffed animals to local convenience stores and small pharmacy chains. All of Tree top sales are on consignment. The consignee receives a 15% commission for each product sold. Treetop completed the following consignment-related transactions.