08 Consignment

Question 1

2. Under IFRS 15, how does a consignor
   satisfy its performance obligation under
   consignment contract?
   A. Satisfaction over a period a period of
   time
   B. Satisfaction at a specific point in time
   C. Either A or B
   D. Neither A nor B

Question 2

3. When the consignor ships merchandise
   out for consignment to the consignee, in
   the books of the consignee, it involves a
   A. Debit to Consignment Inventory
   account
   B. Debit to Merchandise Inventory
   account
   C. Credit to Consignor Payable account
   D. Memo entry

Question 3

4. Which of the following is considered
   capitalizable or inventoriable cost?
   A. Commission
   B. Advertising
   C. Freight from the consignor to
   consignee
   D. Freight from the consignee to
   consignor

Question 4

5. When the consignee pays expenses which
   is reimbursable on behalf of the
   consignor, in the books of the consignor it
   involves a
   A. Debit to Consignor Receivable
   account
   B. Credit to Cash
   C. Credit to Consignment Inventory
   account
   D. Credit to Consignee Payable account

Question 5

1. The following items are found in the
   account sales, except
   A. Expenses of the consignor
   B. Total sales
   C. Amount due to consignor
   D. Commission of consignee

Question 6

2. The account sales shows
   A. The net sales effected by consignee
   B. The net amount due from consignor
   to consignee by way of commission
   C. The net amount due from consignee
   to consignor
   D. None of the above

Question 7

3. Goods on consignment should be
   included in the inventory of
   A. The consignor but not the consignee
   B. Both the consignor and consignee
   C. The consignee but not the consignor
   D. Neither the consignor nor the
   consignee

Question 8

4. Applying the provisions of PFRS 15, when
   shall a consignor recognize its revenue
   from consignment contract?
   A. At the point the goods are sold to
   final customers by the consignee.
   B. At the point the goods are delivered
   to the consignee by the consignor.
   C. At the point the contract of
   consignment is entered into by
   consignor and consignee.
   D. At the point of remittance of by
   consignee to consignor.

Question 9

5. The risk of stock on consignment lies with
   A. Consignor
   B. Consignee
   C. Buyer
   D. Seller

Question 10

6. In consignment sales, the consignee:
   A. records the merchandise as an asset
   on its books
   B. records a liability for the merchandise
   held on consignment.
   C. recognizes revenue when it ships
   merchandise to the consignor
   D. prepares an “account report” for the
   consignor which shows sales,
   expenses, and cash receipts

Question 11

7. In accounting for sales on consignment,
   sales revenue and the related cost of
   goods sold should be recognized by the:
   A. consignor when the goods are
   shipped to the consignee
   B. consignee when the goods are
   shipped to the third party
   C. consignor when notification is
   received the consignee has sold the
   goods.
   D. consignee when cash is received from
   the customer

Question 12

Use the following information in answering the
next item(s):
Todd Sweeney is an artist who sells his work
under consignment (he displays his work in
local barbershops, and customers purchase his
work there). Sweeney recently transferred a
painting on consignment to a local
barbershop.

Question 13

8. Sweeney most likely should recognize
   revenue when:
   A. He paints the painting, because the
   painting is produced while he works.
   B. When he transfers the painting to a
   barbershop.
   C. When the barbershop sells the
   painting.
   D. When the barbershop’s right of
   return expires.

Question 14

9. Which of the following is most true
   regarding consignment arrangements?
   A. Revenue is recognized at the point in
   time when the consignment
   arrangement is made.
   B. Revenue is recognized when goods
   are transferred to the consignee.
   C. Revenue is recognized upon sale by
   the consignee to an end customer.
   D. Revenue is never recognized because
   GAAP does not allow such
   arrangements.

Question 15

10. After Sweeney has transferred a painting
    to a barbershop, the painting:
    A. Should be counted in Sweeney’s
    inventory until the barbershop sells
    it.
    B. Should be counted in the
    barbershop’s inventory, as the
    barbershop now possesses it.
    C. Should be counted in either
    Sweeney’s or the barbershop’s
    inventory, depending on which
    incurred the cost of preparing the
    painting for display.
    D. We lack sufficient information to
    know who should carry the painting
    in inventory